The risk of hard Brexit or early elections in the UK is very low, Pimco’s global bonds chief Andrew Balls said on a conference in London on Wednesday.
“The risk of hard Brexit is low, and the risk of early elections is fairly low as that is the last thing the Conservatives want,” Balls said.
“As long as a chaotic Brexit is avoided, this is pretty stable in terms of the UK outlook. A surprise election and a Labour government would mean a lot of uncertainty about the course of that government.”
The bond specialist also revealed how Pimco had been predicting for a long time the possibility of the UK demanding a new deal with the European Union (EU) since, according to Balls, “it made sense for both sides”.
Regarding to the three potential scenarios more likely to result from the evolution and outcome of ongoing Brexit negotiations, Balls said that the most unlikely was that of the UK exiting in an uncontrolled way from the block. If this improbable outcome took place, the UK economy could experience a significant recession that would also have an impact on the euro, he added.
According to Balls, the two more likely scenarios to occur were either the UK’s Government passing the legislation on the recently agreed deal or the UK not managing to pass it and, consequently, the process being extended and delayed.
Currently, the draft political declaration on the future relationship between the UK and the EU after Brexit is out. Although the draft has been agreed by negotiators, it still needs approval from leaders of all 28 EU countries at a summit expected to take place on the 25 November.
However, formal negotiations on all the points included in the document, will begin just after Brexit actually happens, currently after 29 March 2019.
Pimco is one of the world’s premier fixed income investment managers, launched in 1971 in Newport Beach, California, and introduced investors to a total return approach to fixed income investing.
With 45 years’ history, Pimco has offices across the world. It is owned by Allianz S.E., a leading global diversified financial services provider.