The UK’s economy “picked up over the summer”, based on increased exports and retail sales”, according to the Moody’s “Brexit Monitor”, published on 19 September.

Colin Ellis, a managing director at Moody’s and co-author of the “Brexit Monitor”, stated:

“Construction growth and strong retail demand provided a boost to UK economic growth over the summer…. Although the Brexit vote in June 2016 has weakened UK GDP growth, the impact has so far been less severe than originally forecast by the HM Treasury.”

At the same time, “housing market indicators and investment sentiment have deteriorated”, the Moody’s report stated. Also, “construction activity fell from a high in July.”

Moody’s also noted that:

“Surveys of hiring intentions suggest employment growth could flatten in the coming months.”

And:

“UK house price inflation is continuing on a downward trend and surveys suggest this is likely to continue.”

In a separate report, the ratings agency said it still expects the EU and UK to strike a deal, but warned that a hard Brexit has increased and would hit the finances of several European countries.

Ellis, also co-author of the report, stated:

“We still think the UK and the EU will eventually reach an agreement to preserve many--but not all--of their current trading arrangements, particularly around trade in goods…. However, we believe the prospect of the UK leaving the EU without any agreement has risen materially.”

According to the research note, “Probability of a ‘no-deal’ Brexit has risen, and would be negative for an array of issuers”, issued on 13 September:

“Such an outcome would be very disruptive to current UK-EU trading arrangements and have a material, negative impact on the UK economy and on the economies of certain EU member states. This outcome would also pose particular challenges for UK issuers in the automotive and aerospace, chemicals, airlines, and ports and airports sectors.”

Moody’s cited IMF estimates that British GDP, in 2022, could end up being 4% lower than with a deal.

Banks could expect lower “revenues due to lower lending volumes and renewed pressure on interest margins,” but higher loan losses and increased operating costs on European cross-border transactions.

The economies of Cyprus, Ireland, Malta and the Netherlands could also take a hit due to strong trading links.

Luxembourg is mostly heavily exposed in investment flows, although Moody’s did not forecast the potential negative impact of a no-deal Brexit.