What might Brexit mean for Barclays' share price?

Last month, Barclays analysts said that a no-deal followed by a recession was the most likely outcome of the Brexit process, but with opposition MPs looking to block this path what could it mean for the bank’s share price?

Last month, Barclays said that a no-deal Brexit looked ‘increasingly inevitable’ and would lead to the UK economy slipping into a recession, according to an analyst note seen by Bloomberg.

But a no-deal exit looks considerably less likely after Tuesday night, where MPs defeated Prime Minister Boris Johnson by 328 votes to 301 to take control of the agenda and requested yet another Brexit delay in a move that is likely to prompt a general election on October 14.

Brexit delay bad news for Barclays

In the wake of the decision, Barclays share price climbed more than 1% to 137p a share as of 11:10 GMT on Wednesday. However, on a year-to-date basis, Barclays stock is down some 8%, reflecting an extremely challenging environment for British lenders.

Despite the brief uptick in Barclays share price in response to MPs actions last night, yet another delay to Brexit to January 2020 would likely hurt the long-term economic outlook in the UK and weigh on British banking stocks.

In August, HSBC retained its buy rating for Barclays stock, while Goldman Sachs reiterated its neutral rating, with the two investment banks issuing a target price of 200p and 190p respectively.

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Britain sliding into recession as business activity shrinks

According to the latest IHS Markit’s Purchase Managers’ Index (PMI), it signals that the UK economy is contracting at a rate of 0.1% and unless something brings about a bounce in September, Britain could slide into a recession.

After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the UK economy is slipping into recession,’ Chief Business Economist at IHS Markit Chris Williamson said.

‘The PMI surveys are so far indicating a 0.1% contraction of GDP in the third quarter,’ he added.

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