Britain's newly minted prime minister, Boris Johnson, is counting on brinksmanship to lead his bitterly divided country out of the European Union by an Oct. 31 deadline, a strategy promising short-term pain and uncertainties but opportunities as well for long-term investors, analysts say.
Mr. Johnson's threat to push through a "no-deal Brexit" that would disrupt supply chains on both sides of the English channel if the EU denies him the concessions he needs to win parliamentary support for a more orderly exit has added to the critical mass of uncertainty facing investors in U.K. assets now.
The pound sterling — which traded Aug. 1 at a 12-month low of $1.2075, down from its $1.2657 close on May 23 when Theresa May resigned as prime minister and $1.2476 on July 22, the day before Brexit hardliner Mr. Johnson won the contest to succeed her — has been the key barometer of market concerns about a messy breakup. (With more than half of major U.K. company earnings coming from overseas, a fall- ing pound provides a boost for the FTSE 100 stock index, making that closely watched benchmark a less perfect proxy for market fears.)
With his coalition government clinging to a slender majority in Parliament, a number of his fellow conservatives opposed to a no-deal Brexit, restive chunks of the United Kingdom such as Scotland hinting at Brexits of their own and fair odds of a no-confidence vote or a general election in the months to come, there is no clear path forward for now.
For investors, that "elevated uncertainty" makes it more difficult than usual to arrive at a base case scenario for the rest of the year, said Ken Dickson, an Edinburgh-based investment director on Aberdeen Standard Investments' global strategy team.
A typical "decision tree" analysis doesn't seem equal to the task now, agreed Colin Harte, London-based head of research, multiasset quantitative solutions, with BNP Paribas Asset Management. "This is more like a decision forest," he said.
Most observers agree on one thing: Mr. Johnson's coming to power has made a departure from the EU that could prove highly disruptive for the U.K. economy much likelier.