Brexit End Likely to Be Based on a Customs Union, JPMorgan Says

Vonnie Quinn
Breakthrough in U.K. Party Talks Unlikely Today: Brexit Update

(Bloomberg) -- The realities of the Brexit situation indicate that the U.K. is going to end up with “something that’s founded on a customs union” with the European Union, according to Karen Ward, chief market strategist for Europe, Middle East and Africa at JPMorgan Asset Management.

“There are two realities to Brexit,” Ward said in an interview with Bloomberg Television on Thursday. “One is: there is a border between northern and southern Ireland.”

The other reality is “our supply chain is heavily integrated with the EU,” Ward said. “Those two realities have always led me to believe that Brexit will end up in something that’s founded on a customs union, because that is the only solution to both the Irish border and that trade reliance with the EU.”

Ward said some “really important arithmetic” on the stances of members of the U.K. Parliament toward Prime Minister Theresa May’s divorce deal also points in the same direction.

Among MPs in the House of Commons, “roughly 400 don’t like the deal; but roughly 100 of those don’t like the deal because they would like something harder; roughly 300 don’t like the deal because they’d like something softer,” Ward said.

“So suppose Prime Minister May loses again – third time unlucky – and Parliament wants to take control of moving the process forward,” in that case “there will be increasing evidence once again, as we saw with no-deal, of where there is a majority in Parliament,” Ward said.

“And that will be increasingly toward something that’s softer, that’s founded on a customs union,” she said.

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