Brexit: The United Kingdom’s Departure Deadline Looms

The United Kingdom and the European Union (EU) have signaled that a Brexit deal is still possible, with signs of a potential compromise over the Irish border starting to emerge. Although the prospect of reaching a deal before the 31 October deadline does exist, time is running out. Even if UK Prime Minister Boris Johnson were to strike a deal with the EU, he still needs the backing of the UK Parliament, which remains highly uncertain. This makes an extension the most likely outcome, in our view, potentially followed by an early election. However, calling the outcome of an election is incredibly difficult, for the reasons we set out below.

Is a Deal Still Possible?

We believe there is strong political will on both sides to agree to a deal. Johnson would be seen to deliver Brexit as promised while EU Commission President Jean-Claude Juncker may be keen to ensure a deal is reached by the end of his term in November 2019. The Irish border has long been a key sticking point in negotiations. Johnson has strongly opposed the inclusion of a backstop arrangement, which former Prime Minister Theresa May had been willing to accept. While the backstop would avoid additional border checks between Northern Ireland and the Republic of Ireland if the United Kingdom were out of the EU, it would keep the United Kingdom in a close trading relationship with the European single market and unable to strike trade deals with countries outside of it.

Johnson has proposed a “technology-led” border solution that would keep Northern Ireland aligned with the EU’s single market, thus eliminating the need for regulatory checks when goods cross into the Republic of Ireland, while ensuring it remains in the customs territory of the United Kingdom. While this would result in a customs border between Northern Ireland and the Republic of Ireland, Johnson asserts it would not necessitate a physical border as the proposed customs checks would be carried out at traders’ premises or other points along the supply chain. EU officials believe this to be a complicated proposal—one that requires further discussion before it could be considered a solution—but have not yet ruled it out.

If an agreement on the customs border is reached, this would likely significantly reduce the risk of a no-deal outcome. The United Kingdom leaving the EU without a deal would arguably be the worst outcome for Ireland more so than for the remaining 27 EU countries. Ireland has the highest exposure to the United Kingdom in terms of its total exports and it has been estimated that it would suffer the biggest hit to its gross domestic product.

Any agreement reached between Johnson and the EU still requires backing by the UK Parliament. The Democratic Unionist Party (DUP)—which is in a confidence-and-supply arrangement with the Conservative party and effectively keeping the government afloat—has previously opposed subjecting Northern Ireland to different customs rules than those imposed on the rest of the United Kingdom.

The preceding is an excerpt from Brexit: The United Kingdom’s Departure Deadline Looms. Read the full paper to learn about the investment implications for the “deal,” “extension,” or “no deal” scenarios.

Important Information

This content represents the views of the author(s), and its conclusions may vary from those held elsewhere within Lazard Asset Management. Lazard is committed to giving our investment professionals the autonomy to develop their own investment views, which are informed by a robust exchange of ideas throughout the firm.

This document reflects the views of Lazard Asset Management LLC or its affiliates ("Lazard”) based upon information believed to be reliable as of the publication date. There is no guarantee that any forecast or opinion will be realized. This document is provided by Lazard Asset Management LLC or its affiliates ("Lazard”) for informational purposes only. Nothing herein constitutes investment advice or a recommendation relating to any security, commodity, derivative, investment management service, or investment product. Investments in securities, derivatives, and commodities involve risk, will fluctuate in price, and may result in losses. Certain assets held in Lazard’s investment portfolios, in particular alternative investment portfolios, can involve high degrees of risk and volatility when compared to other assets. Similarly, certain assets held in Lazard’s investment portfolios may trade in less liquid or efficient markets, which can affect investment performance. Past performance does not guarantee future results. The views expressed herein are subject to change, and may differ from the views of other Lazard investment professionals.

This document is only intended for persons resident in jurisdictions where its distribution or availability is consistent with local laws or regulations. Please visit for the specific Lazard entities that have issued this document and the scope of their authorized activities.

© Lazard Asset Management

More Factor-Based Investing Topics >