Chart 55: OBR / BofAML UK GDP forecasts Chart 56: UK Public sector net debt is expected Chart 57: The weaker econ outlook has helped materially lower in 2017 to return to 1960s levels decouple GBP and gilts since late Sept’ 16 j 120 mmm OBR real gdp %yoy growth forecast UK Public sector net 25 40y gilt yield 4 6 mums BAML real gdp %yoy growth forecast debt as % GDP... a 1.55 === OBR UK real gdp %yoy growth March vs Nov 2016 forecasts. 100 2 —— GBP/USD (RHS) - 1.5 2120 0 | 4.46 1.4 60 1.4 1 09 ag 40 4.35 1.3 20 0.5 1.25 2016 2017 18.94 O. rrrprrrrrrrrrnerreerrrere ee ee ee rere 0 L 12 , St oASSTHASSTAASS eee & fe ¢€ 8 08 SS2S2L222°SF2SRHR RRS & 3 @ & 5 268 Source: BofA Merrill Lynch Global Research, Office of Budgetary Source: Office of Budgetary Responsibility Source: Bloomberg Responsibility Certainty that Brexit negotiations will start, but uncertainty on the details Against this debt and growth backdrop, investors are likely to want clarity and visibility on policymaking in order to continue funding the Uk’s deficit in our view. We think they could be disappointed. Firstly, the Government has committed to triggering Article 50 by the end of March 2017. We think this is likely irrespective of the outcome of the Judicial Review on where the legislative power lies for making that decision. Second, the Government’s formal position is not to announce its negotiating strategy in public. A lack of insight into the Uk’s future trading relationship with its biggest export market for goods and services is a difficult backdrop upon which to continue investing in the UK, even if a few companies have taken that decision already. Third, we think there will have to be a resolution to the trade-off between the Government’s desire to control immigration and reach a beneficial economic settlement. The problem, as is often repeated by EU leaders, is that curbing migration puts the UK on a collision course with the EU’s four freedoms and therefore at odds with access to the single m