The U.K. and the rest of the European Union may want to come out of the Brexit negotiations on a positive note, but one leading London-based professor tells CNBC this may not be the case.
“Everybody wants win-win, everybody wants for (us to) all be better off. It’s not going to be that way,” Richard Portes, professor of economics at London Business School, told CNBC Friday.
“We’re all going to be – both on the U.K. side and the EU-27 side – we’re all going to be worse off. There’s no way that you can avoid the shocks, the negative shocks that will come from breaking the past trade, investment and so forth relationships that we’ve had.”
It’s been just over a week since the U.K. triggered Article 50 and in the run-up to – and following the – triggering of formal exit talks, leading figures from both the U.K. and EU have stated that they want to keep close ties, with Eurogroup Chief Jeroen Dijsselbloem saying in Berlin Thursday, that both the U.K. and the rest of the EU should try to “minimize the damage” of Brexit, with him also highlighting the risks facing financial stability, Reuters reported.
On the sidelines of the Ambrosetti Finance Workshop in Italy, Portes discussed the economic outlook for Europe and the U.K., telling CNBC that while the euro area’s economy has been picking up, troubles are expected ahead for the British economy.
“The outlook, interestingly, for the euro area economy has been picking up very substantially over the past half a year and that’s partly to do with the European Central Bank’s aggressive easing policies.”
When it comes to the U.K., however, Portes believed the Bank of England would be facing its own set of challenges as the end of 2017 approaches.
“I think the Bank is going to be facing a hard choice towards the end of this year, because I think that consumer expenditure will be slowing down, investment will not be picking up and inflation will be picking up.”
“So the bank will have the classic conflict between ‘do we raise rates to combat inflation?’ with the possibility that in fact that the economy is slowing down significantly.”
