Brexit warning: UK ‘likely to request extension’ as economy braces for downturn

A spokesman for the Prime Minister said on Thursday the government would not ask the European Union to extend the phase beyond December 31 – but Dr Dionyssis Dimitrakopoulos believes he may find himself backed into a corner amid the coronavirus pandemic. The UK’s exit from the bloc is due to be formalised at the end of this year and both sides are holding talks in a bid to strike a free trade deal.

But the issue has taken a backseat as politicians focus their energy on dealing with the COVID-19 epidemic.

Dr Dimitrakopoulos, a senior lecturer in politics at Birkbeck University, told “I think looking at it from the economic front an extension is likely to be requested.

“I fully expect business leaders have already been asking the Government to extend it due to the crisis.

“Business leaders would welcome an extension because it would give them a degree of stability.

“But what is good on the economic front is not necessarily good on the political front.”

He warned Mr Johnson could find himself torn between two interests in the coming weeks.

Hardcore Brexiteers are likely to demand he stick to his guns and end the transition period this year whether a trade deal has been secured or not.

But business owners across the UK who helped the Conservatives win back their majority in the December election may be more concerned about their livelihoods than political timeframes.

If the UK and the EU cannot agree on trade both sides will be faced with barriers to exports and imports on January 1 2021.

The fallout from the coronavirus crisis is expected to pose extra challenges to post-Breixt trading between Britain and the 27-member bloc if no deal can be found.

This week the UK and the EU announced their next round of trade talks, which will kick off on Monday.

Analysts predict the Government’s refusal to request more time could have a negative impact on the pound.

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“Preparations must surely have taken a significant knock in recent weeks and investors are likely to price in an even more sparsely detailed trade deal if the deadline of year-end is maintained,” said Derek Halpenny, head of research at MUFG.

“We see this as a reason for sterling recovery to remain more muted and remains a negative risk for the pound as COVID-19 risks hopefully start to recede.”

Dr Dimitrakopoulos also warned about rising anti-EU sentiment on the continent.

He said German Chancellor Angela Merkel had failed to step up to the plate as member states were forced into lockdown.

He joined a rising chorus of commentators who have criticised Mrs Merkel’s response to the biggest test in the history of the EU.

While she has been praised for unifying Germany during the crisis her response to the epidemic in wider Europe has been viewed in a less favourable light.

“Merkel could have said and done more,” explained Dr Dimitrakoploulos.

“She could have said a lot more to provide a boost to collective opinion. But she’s a cautious politician.

“She could have provided an extra impetus for collective responsibility that has not been found.”

While many EU member states have called for more financial solidarity as a potential crippling economic downturn looms on the horizon, Germany’s resistance to debt mutualisation is seen as a major roadblock.

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