‘Terms of Brexit transition deal are credit positive’

LONDON (AA) - The agreement between the European Union (EU) and the U.K. on the terms of a transition arrangement reduces the risk of a "cliff-edge" Brexit in March next year, Moody's said.

In a statement issued on Monday, Moody’s said the terms of post-Brexit transition deal are credit positive, yet remains “conditional” on final conclusion of the withdrawal.

“The agreement remains conditional on the EU and the UK resolving differences in other areas of the withdrawal, in particular finding a solution that prevents a hard border between Ireland and Northern Ireland, as well as legal enforcement mechanisms.” Moody’s said.

"Greater clarity on the post-Brexit transition arrangements is credit positive for a broad range of UK issuers as continued access to the EU internal market until end-2020 would extend the narrow timeframe available to shape and implement a new trade arrangement and regulatory regimes," said Colin Ellis, Moody's Managing Director.

Noting that without the withdrawal agreement being concluded, the U.K. will become a 'third country' in its trading relationships with EU member states upon its exit, Moody’s said this could have substantial negative consequences for its economy and weigh on the credit quality of the U.K. issuers.