The spectre of a recession could soften opposing sides on Brexit

Bookies have shortened the odds on a Brexit deal because the UK and European Union economies are weakening. They are betting that the downturn in both the UK and European Union (EU) economies will encourage flexibility.

Much will depend on the politicians on both sides of the British channel, who have been key in creating a climate of uncertainty that has been bad for business. The hope is that members of the Tory party's extreme Brexit wing are beginning to appreciate that a no-deal Brexit could accentuate and accelerate the current downturn. They would likely vote for Theresa May's deal, as a potential recession could lose them seats in the next election.

The economic slide is the result of poor policies in Britain and the rest of Europe during the past two to three decades. The response of the European political class to the 2008-2009 financial crisis was to pursue severe austerity to reduce debt. While they slashed state spending, they bailed out errant banks and encouraged their central banks to pump money into the financial system. These actions boosted prices of shares, property and other financial assets, but mostly failed to boost direct job-creating productive investment in factories, plant and equipment. The result has been increased income inequality and the rise of far-right and far-left parties.