Brexit

Brexit trade deal gets tougher as coronavirus strikes officials on both sides

Key Points
  • While U.K. finally left the European Union on Jan. 31, it remains in a transition period and has a deadline of end 2020 to set a free-trade deal with the EU. Now, whether Britain would be able to meet that deadline is now in question.
  • "In all circumstances it's very difficult to imagine how some sort of large scale trade deal between the U.K. and the EU gets done by the end of the year," said Amanda Sloat, a senior fellow at Brookings Institution.
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UK PM Boris Johnson now in intensive care after coronavirus symptoms worsen

The Brexit trade deal will face greater challenges ahead as British Prime Minister Boris Johnson is now in intensive care because of the coronavirus, while other key negotiators have either been infected or are in self-isolation.

The U.K. finally left the European Union on Jan. 31, but it remains in a transition period and has a deadline of end 2020 to set a free-trade deal with the EU. Now, whether Britain would be able to meet that deadline is in question.

"In all circumstances it's very difficult to imagine how some sort of large scale trade deal between the U.K. and the EU gets done by the end of the year," Amanda Sloat, a senior fellow at Brookings Institution, told CNBC on Tuesday.

"In the last couple weeks, we've seen EU's Brexit negotiator get coronavirus, the British negotiator has also been showing symptoms and now of course this very sad situation with the prime minister," she added. On March 19, Europe's chief Brexit negotiator Michel Barnier also announced he had been infected, while U.K. negotiator David Frost went into self-isolation around the same time after showing symptoms.

Johnson, 55, was moved to intensive care on Monday as his coronavirus symptoms worsened over the course of several hours, according to a statement from the government. He had announced on March 27 that he tested positive and was experiencing "mild symptoms."

Foreign Secretary Dominic Raab will temporarily take over the prime minister's duties while Johnson is hospitalized, the government said.

"Clearly with this move into intensive care, there is a desire to put extra precautions into place, (Johnson) clearly is not in a position to govern at the moment," Sloat said. 

UK in transition

The U.K.'s departure on Jan. 31 marked the start of a "transition period" in which the U.K. remains a member of the EU's single market, and began negotiations with the EU to strike a free-trade deal. During the transition period, the U.K. will not have voting rights on EU matters, but will still be bound by EU rules.

If a trade deal is not reached by the end of 2020, the U.K. will leave the single market with no deal, and will have to revert to World Trade Organization rules.

"Most people were skeptical that it was gonna be done by November even under the best of circumstances," Sloat added, referring to the U.K.-EU trade deal. "The U.K. has until June 30 to ask for an extension to this transition period. The EU had been clear — although we'll see with the changed circumstances — that they would not entertain a request for a delay." 

The sterling fell by nearly a cent against the U.S. dollar on news that Johnson was admitted into intensive care. The pound fell to as low as $1.221, from $1.230 earlier, before last edging up to $1.229.

On whether that news would put pressure on the pound, Claudio Piron, foreign exchange strategist at Merrill Lynch (Singapore), said that ultimately, the U.K. has a "sound and strong" political institution.

"No doubt the U.K. parliament is a strong and robust democratic institution ... in that regard the political structure will be in play," he told CNBC.

— CNBC's Holly Ellyatt and Kevin Breuninger contributed to this report.