The high level of Brexit-related uncertainty has shaved growth by about -0.3pp in 2018 through a multitude of channels to the real economy (household real purchasing power, household savings rate, corporate margins, business investment, tightness of labor market, real estate prices and UK attractiveness, to name a few). Worsening business and consumer confidence coupled with higher risk aversion could trigger tighter loan availability by banks. We continue to expect a last-minute agreement that could take the form of (i) a ratification of a revised Brexit deal by the UK Parliament on 14 February or slightly later, and (ii) an extension of Article 50 to July or December 2019. However, this suggests that the prevailing uncertainty could push the Bank of England to delay its rate hike currently expected in Q2 (+25bp to 1%) to late in H2. We forecast the economy to expand by +1.2 % in 2019. Inflation should benefit from lower oil prices in H1 and a rebound in the GBP (projected at 1.15-1.20 vs. the EUR by year-end).
