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MALTATODAY 5 SEPTEMBER 2018 MIDWEEK

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maltatoday | WEDNESDAY • 5 SEPTEMBER 2018 11 BUSINESS www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way No-deal Brexit odds hold at one in four, economists say – Reuters poll THE chances Britain will leave the European Union in March without a deal are one in four, a Reuters poll found, and the Bank of England is likely to wait until after Brexit before raising borrowing costs again. The Reuters poll was con- ducted between 29 August and 3 September, as pressure mounted on British Prime Minister Theresa May, who is struggling to sell what she calls her business-friendly Brexit to her own party and across a divided country. With less than two months before Britain and the EU are supposed to agree on the terms of Britain's EU exit, not only are the two sides still sparring, but deep divisions are splitting May's own ruling party. May's Brexit strategy means disaster for Britain, her for- mer foreign secretary Boris Johnson said on Monday, as critics at home and officials in Brussels stepped up their op- position to her plans for how to leave the EU. When asked the probability of a disorderly Brexit, where- by no agreement is reached by the end of March 2019, the median forecast in the poll was 25 percent – unchanged from an August estimate. However, nine of 34 com- mon contributors in this poll and the last raised their num- bers and the highest predic- tion was 60 percent. Four re- duced their odds and 21 left them unchanged. "The chances of the UK leav- ing the EU has undoubtedly risen recently, and we have become less confident of an orderly exit," said Howard Archer at EY ITEM Club. "Nevertheless, we still think it is more likely than not that the UK and EU will come to a deal, although it could very well be uncomfortably late for ratification by March 2019." With a deal considered like- ly, the chance of a recession remains remote. Medians gave the likelihood of one in the coming year as 15 per- cent, down from 20 percent given in July, and within two years at 25 percent. But as there is still little clar- ity on how Britain will trade from April, and as a global trade war escalates, median forecasts for post-Brexit eco- nomic growth were revised down from August projec- tions. Expansion is now put at 1.4 percent for next year, down from 1.5 percent last month, and an unchanged 1.6 percent in 2020. British manufacturers had their weakest month in over two years and export orders suffered a rare decline in Au- gust, a warning that a world economic slowdown, as well as the approach of Brexit, is hurting the country's manu- facturers. Construction activity slowed in August to a three- month low, another survey showed, weaker than any ana- lyst polled by Reuters had ex- pected. But that won't deter the Bank of England from raising Bank Rate soon after March, adding 25 basis points to take it to 1.0 percent. It will stay there until another 25 basis points is added in 2020, the poll found. Inflation jumped after the Brexit vote – in large part driven by a fall in sterling – and is not expected to fall back to the central bank's 2 percent target until the end of next year. Asked when Bank Rate would reach 1.5 percent, the earliest date given was 2020. "It is likely to be a slow haul on rates with the BoE pro- ceeding cautiously in the face of Brexit-related uncertain- ty," said Peter Dixon at Com- merzbank. "Getting to 1.5 percent as quickly as possible may make sense on the basis that it gives the BoE more policy flexibil- ity." Eurozone producer prices up more than expected in July EUROZONE producer prices rose slightly more than fore- cast in July, driven by expen- sive energy, data released yes- terday by the European Union statistics agency showed. Eurostat said prices at fac- tory gates in the 19 countries sharing the euro rose 0.4 per- cent month-on-month in July against market expectations of a 0.3 percent rise in a Reu- ters poll of economists. Year-on-year, producer prices rose 4.0 percent in July, against market expecta- tions of a 3.9 percent gain. Energy prices rose 1.1 per- cent on the month and were 10.7 percent higher than a year earlier, making energy the biggest variable in the overall index. Without volatile energy, producer prices rose only 0.1 percent month-on-month and 1.7 percent year-on-year, confirming the view of Eu- ropean Central Bank chief Mario Draghi that spiking energy prices are the main reason for higher inflation. Prices at factory gates her- ald trends in consumer infla- tion because unless absorbed by intermediaries or retailers, higher producer costs trans- late directly into higher con- sumer prices. The European Central Bank wants to keep consumer in- flation below, but close to 2 percent over the medium term. An early Eurostat esti- mate showed last week that in August, consumer infla- tion was 2.0 percent year-on- year.

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