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No-deal Brexit could lead to new recession

BRITAIN is heading for another recession next year if it crashes out of the EU with a no-deal Brexit, shrinking the economy by 2%, predicts the UK’s official economic forecaster.

Since the 2016 referendum, there have been warnings that leaving the bloc in this manner would be a disaster for the economy.

The Office for Budget Responsibility (OBR) has now offered its official assessment, and the forecast appears dire! The organisation has warned that a no-deal scenario will have a devastating effect on wages, employment and house prices.

Its five-year forecast predicts that the economy will decline in 2020 and enter recession, and the UK’s Gross Domestic Product (GDP) is likely to be at least 2% lower.

In its executive summary, the OBR said: “Heightened uncertainty and declining confidence deter investment, while higher trade barriers with the EU weigh on exports.

‘Together, these push the economy into recession, with asset prices and the pound falling sharply. Real GDP falls by 2% by the end of 2020 and is 4% below our March forecast by that point.

Both Conservative leadership candidates, Boris Johnson and Jeremy Hunt, have said they are prepared to leave the EU without a deal.

Parliament could even be suspended to force through a

no-deal, because MPs voted earlier this year that they wanted to leave with some form of divorce deal with the bloc.

If the UK does crash out, it will have to revert to World Trade Organisation rules on trade, automatically, leading to much higher tariffs for companies.

The OBR’s prediction is based on models from the International Monetary Fund (IMF), which has assumed no border disruption, but a 4% increase of tariffs.

Last November, the Bank of England warned that the economy could shrink by 8% by 2035 and that interest rates would have to rise by 5.5% to offset the impact.

 

 

Short URL: http://www.canarianweekly.com/?p=48976

Posted by on Jul 19 2019. Filed under Local News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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