Nicola Mai, sovereign credit analyst and portfolio manager at Pacific Investment Management Co (Pimco), told Bloomberg markets investors are already factoring in all the worst-case scenarios the Brexit process could cause a fall of the Pound Sterling. But he claimed a hard Brexit would be unavoidable even if Boris Johnson requested an extension to the Article 50 process and reached a deal with the European Union later on this year or next year. 

He said: “A lot of bad news is already priced in. I would expect an election to take place and to be called in advance of Brexit.

“I think a chaotic exit on the 31st of October is going to be avoided.

“I think there’s going to be an extension of some kind and eventually we will end up with a pretty hard Brexit.

I think there’s going to be an extension of some kind and eventually we will end up with a pretty hard Brexit

Nicola Mai

“But I think the path ahead is pretty volatile. I would say that gilds are already pricing in a lot of this news.”

However, the chances of Britain leaving the EU without a deal in place on October 31 have now jumped to more than one in three, a survey of economists has indicated.

The survey of 55 economists suggested Sterling’s recent slide was not yet over, with the chances of Britain and the European Union parting ways without a withdrawal deal on the October 31 having jumped from 30 to 35 percent since Boris Johnson took over as Prime Minister last month.

And the Financial Times said Mr Johnson’s aides were expecting he will face a confidence vote soon after parliament returns from its summer break.

A senior 10 Downing Street official said: “We can’t stop them forcing an election but we control the timetable so we will force the date after October 31.

“If there must be a general election, then it will be days after October 31.”

Jane Foley, head of FX strategy at Rabobank and the most accurate forecaster for major currencies in Reuters FX polls last year, said: “Fears of a no deal Brexit are likely to worsen, though we anticipate it will be avoided.”

Boris Johnson’s top adviser Dominic Cummings is said to have argued that losing a vote of confidence would still allow the Prime Minsiter to set an election date after October 31, by which time the UK would be out of the EU with nothing a new government could do to stop it.

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In a letter to Cabinet Secretary Sir Mark Sedwill, Labour leader Jeremy Corbyn said such a course of action would be “unprecedented” and “unconstitutional”.

He said the Cabinet Office’s election “purdah” rules make it clear that policy decisions on which a new government “might be expected to want to take a different view” should be postponed until after polling day.

He asked Sir Mark to confirm that if the UK is due to leave the EU without a deal while an election is under way, the Government should seek another time-limited extension to Article 50 to allow the voters to decide.

“Forcing through no-deal against a decision of Parliament, and denying the choice to the voters in a general election already under way, would be an unprecedented, unconstitutional and anti-democratic abuse of power by a Prime Minister elected not by the public but by a small number of unrepresentative Conservative Party members,” he wrote.

“A Labour government will never support a no-deal exit, so would of course ‘want the opportunity to take a different view’.”

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