Goldman Sachs: Brexit extension to exacerbate UK economy

Goldman Sachs said on Friday that the nation’s Brexit delay is set to damage the British economy even further.

With little progress being made on the matter in the UK, GBP/USD is currently trading around 1.2900 among Brexit deadlock.

Britain, home to the world’s fifth largest economy, was originally due to formally depart from the European Union on 29 March. However, as parliament was unable to agree on a deal, the deadline was pushed back an additional six months to the 31 October, a rather poetic date to end over three years of political chaos.

In a note entitled “Brexit – Withdrawal Symptoms”, Goldman Sachs said:

“The politics of Brexit have become more protracted and, as a result, the side-effects of Brexit on the UK economy have intensified.”

“From both a top-down and bottom-up perspective, Brexit has taken a toll on the UK economy – even though it has not yet happened,” it continued.

Others, such as the head of the International Monetary Fund, said that Brexit’s additional delay avoids a “terrible” no-deal scenario.

Goldman Sachs is not alone in predicting the economic damage caused by Brexit. S&P Global Ratings predicted that had voters not opted for leaving the European Union in the first place, the UK economy might have been roughly 3% larger by the end of last year.

Sector-specific issues have also been reported, with news recently emerging that an outright departure without a deal might cost the UK’s luxury sector £6.8 billion.

News also emerged on Friday of a fall in RBS (LON:RBS) profits, with Brexit cited as a key problem. The bank posted a £707 million profit for the first three months, which is down from the £808 million figure of the same period a year prior. It cited on the impact of the ongoing Brexit uncertainty and the effects this has on its business.

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