The businesses most directly affected are those selling food products into the EU - fish, cheese, meat - and those selling direct to EU consumers who now have to pay import VAT before the goods are delivered, leaving the UK seller uncompetitive.As time goes by we will see more of these unexpected consequences, none so far positive. But as I keep asking, do please tell me when there is positive Brexit news.As Michael says, Brexit is not directly relevant to the vaccine debacle though it is not exactly the EU's finest hour. And here is a summary of Moody's latest analysis of the effects of Brexit:London, January 25, 2021 --Brexit trade deal is largely lacking in areas vital to the UK economy, such as servicesThe UK economy will be significantly smaller over the longer termThe new Brexit trade deal reached by the United Kingdom and the European Union confirms the macroeconomic cost for the UK sovereign of losing its EU membership, while the economic benefits from new regulatory autonomy remain uncertain, Moody's Investors Service says in a report today.The agreement's economic provisions are skewed in favour of the EU, with the UK willing to accept significant new barriers to trade in areas in which it has a comparative advantage. As a result, the new arrangement between the UK and EU will entail significant negative macroeconomic consequences for the UK that are structural in nature.However, Moody's ratings for the UK sovereign and domestic UK issuers already incorporate the negative effects of a protracted Brexit process, as well as the potential for any additional temporary barriers and disruptions to trade."While the Brexit agreement avoids a no-deal scenario, it largely lacks substance in areas vital to the UK economy, such as services," said Benedicte Andries, a Moody's Analyst and the report's co-author. "The UK economy will thus be significantly smaller over the longer term."For UK sub-sovereign debt issuers, a slower economic recovery could erode their budgets through slowing or declining central government transfers, which make up a significant share of their revenue. It would also directly affect their own-source revenue.In addition, a weaker economy, the reversal of the stamp duty holiday and a continued subdued labour market could also slow housing market activity and house price inflation, which would affect housing associations that have significant exposure to development for market sale.UK insurers will be able to continue transacting in the EU because they already do so through locally regulated subsidiaries. The same applies to European insurers that operate in the UK as they largely do so through UK-regulated subsidiaries.Similar to UK insurers, UK banks with cross-border activities have largely established EU branches and subsidiaries to support their EU customers.For corporates, qualifying requirements and additional regulatory and conformity controls will make it significantly more difficult to trade goods between the UK and EU and will add to administrative and operational costs for all exporting companies.Moody's expectation that the UK economy will be significantly smaller over the long term as a result of Brexit is negative for all structured finance asset classes. To the extent that the agreement alters sector performance, such as SME default rates or retail real estate prices, the agreement will indirectly affect related deal performance as well.
Jonathan Callaway ● 1891d