The Brexit plan formulated by the Conservative cabinet late last week would position the UK for a relatively soft exit from the EU, but it faces significant challenges, Fitch Ratings says. It is not clear that the plan in its current form will be acceptable to EU negotiators and the UK parliament, as highlighted by today's resignations of two senior cabinet ministers.

The political, economic and institutional uncertainty stemming from the UK-EU negotiations is reflected in the Negative Outlook on the UK's 'AA' sovereign rating.

The UK government on 6 July said that it had agreed 'a more developed and comprehensive proposal' for the future economic relationship based on 'a free trade area for goods' with a common rulebook to ensure frictionless trade at the border. The relevant agreements would be interpreted under a 'joint institutional framework' with UK courts paying due regard to EU case law regarding the common rulebook. The UK would levy UK tariffs on goods intended for the UK and EU tariffs on goods intended for the EU.