Fitch: Brexit negotiations remain hugely challenging

"The agreement between the UK and the EU to move to the next phase of Brexit negotiations is a step towards a potential agreement on Brexit and trade, but the process remains lengthy and challenging, and the deal leaves many key uncertainties unresolved," Fitch Ratings argued in a recent report.

Key quotes

UK and EU negotiators on Friday set out joint commitments that would form the basis of a withdrawal agreement, ahead of a European Council meeting on 14-15 December.

Failure to move the negotiations on would have increased the risk of the UK failing to secure a future trade relationship or a transition period, and experiencing a severe economic shock when it leaves the EU in March 2019.

Fitch's UK forecasts in our most recent Global Economic Outlook, which see GDP growth rising to 1.7% in 2019 after slowing to 1.4% next year, assume a transition period that maintains the current relationship, and today's announcement supports this assumption. 

Nevertheless, Brexit negotiations remain hugely challenging. The time available to secure a trade agreement has shrunk. 

Overall, today's announcement does not alter the view we expressed when we affirmed the UK's 'AA' sovereign rating in October.