On Wednesday, Prime Minister Boris Johnson asked the Queen to shut down Parliament in the weeks before Brexit. The move – known as proroguing Parliament – greatly increases the chances that Britain will leave the bloc without a deal and came a day after opposition party leaders agreed to a plan to prevent such scenario. Mr Johnson, who entered Downing Street in late July, has pledged to deliver Brexit October 31, with or without a deal, angering many who argue this would carry dire economic consequences.
Among the no deal opponents, there are many bankers and executives in the City of London.
In response to Mr Johnson‘s move, Ludovic Colin, head of global flexible bonds Vontobel, told FinancialNews: “We continue to see the worst case scenario unraveling in front of our eyes.
“Boris Johnson’s agenda is to force the UK out with or without a deal, and then trigger snap elections in November. The UK is going to face a huge economic headwind associated with unclear long-term economic policies.
“This can only mean a weaker pound, weaker Gilt yield and potentially higher public deficits down the line.”
Last month, the Bank of England also warned that a no deal Brexit could trigger a material shock to the UK economy while causing widespread disruption for EU companies by cutting them off from London-based banks.
Mark Carney, the Bank’s governor, said: “The perceived likelihood of no deal Brexit has increased since last year. Although the degree of preparedness for such a scenario has improved, material risks still remain.
“Although such disruption would primarily affect EU households and businesses, it could amplify volatility and spill back to the UK in ways that cannot be fully anticipated or mitigated.”
As no deal fears grow, a newly-resurfaced debate with Lord Lawson has resurfaced, in which the the former Chancellor argues why Britons should not trust pro-Remain bankers or financial services.
At the Oxford Union in 2013, Lord Lawson said: “I have reached the firm conclusion that time has come for the UK to say: ‘We must love you and leave you.’
“Would there be an economic cost in doing so?
“If there would be, it would be minuscule and far outweighed by the economic benefits of escaping from misguided EU regulations.
“This is particularly true in the field of banking and financial services, which has such a crucial importance to the British economy.”
The former Chancellor noted: “I am well aware that at present time the position of the United Kingdom banking industry is that it would be disastrous for the City of London if we were to leave the EU.
“And of course, these are precisely the same bankers who some 15 years ago were saying that it would be disastrous for the City if the UK were to keep the pound sterling and not adopt the euro.”
Lord Lawson added: “Now it is tempting to explain this nonsense by pointing out that while bankers know a lot about banking, they little know about politics and economics.
“The second half of their problem is correct but recent events, when bankers by their own greed and folly made such disastrous bad calls that they had to bail out at massive expense by the British taxpayers, suggests that that many of them are not that hot at banking either.”