German Chancellor Angela Merkel said Tuesday that a Brexit agreement between the European Union and the U.K. is possible in October, but it is not yet clear what the British government wants.
Speaking at a conference in Germany, Merkel said the U.K. cannot choose to be part of the single market — the European common area where goods, services and people move freely — without respecting all its principles.
The U.K. government wants to control the number of European citizens moving to the U.K. During a cabinet meeting Monday, Prime Minister Theresa May's government agreed that EU workers should face the same immigration rules as non-EU citizens. Some have argued that restricting the number of low-skilled EU migrants will hurt the U.K. economy.
Merkel also said Tuesday that European businesses need clarity, which demands "hard work" from Brexit negotiators in the next six to eight weeks.
There have been repeated comments from both sides of the English Channel that negotiations need to be intensified to reach a deal by no later than November. However, many analysts are sceptical that a Brexit agreement will be reached.
"We have highlighted for some time that the risks of 'no deal' are appreciably high," Dean Turner, economist at UBS Global Wealth Management, said in a note Tuesday morning.
"We don't believe that this will happen by design, as it is in neither sides' interests to generate the kind of economic disruption that would likely ensue. But with every day that passes without progress, the risks grow that such an outcome could occur by accident."
UBS has estimated a growth rate of 1.4 percent in the U.K. this year and 1.2 percent in 2019.