The markets are clouded by the increased probability of a hard Brexit and the current primer minister's cabinet is discussing an offer of billions of pounds to the European Union in order to get an access to the single market for the City as well as many other sectors that could benefit from having a single-market access. Obviously it shows that accessing to the single market of the European Union has been benefiting the British economy for the last decades, the referendum result of leaving the European Union could damage the British economy and force some firms out of the country; and now the cabinet is discussing about a possibility of becoming independent of the European Union but paying the access to the European single market.
This is not impossible and I think is very likely to happen in the end. When Britain is in the European Union, Britain needs to pay for its "membership"; once Britain leaves the European Union, if it still wants the access to the single market, it is fair for it to continue to pay for its "subscription", however, I think the "subscription" fee will be higher than the "membership" fee. The European Union needs the funding from Britain, this is why this deal will be accepted by the European Union. This could be mutually beneficial; however, it will add more burden on the shoulder of the British government budget. The British government may issue more government bonds to pay for the "subscription" fee and I can imagine many banks will like this idea of "subscription" fee. The yield of the British government bond yield could stay low as although the deficit worsens, the British economy will be strengthened by this plan. Moreover, the GBP may even appreciate for the same reason.
Therefore, Britain can have the access to the single market by paying a fee to the European Union, the positive side is stronger than the negative side of this plan, I expect the British currency will appreciate once the plan is confirmed and accepted by the European Union.
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