A no-deal Brexit will plunge Britain into recession and shrink the economy by two per cent, a report by the UK’s official economic forecaster has said.
UK Metro reports that there have been warnings since the 2016 referendum that crashing out of the bloc would be a disaster for the economy.
The Paper says that now, the Office for Budget Responsibility (OBR) has given its official assessment – and the forecast appears dire.
It said that the organisation warned on Thursday morning that no-deal will have a devastating effect on wages, employment and house prices.
In a five-year forecast, the Office for Budget Responsibility predicts the economy will decline in 2020 and enter a recession – technically two-quarters of shrinking GDP.
The UK’s GDP is likely to be at least 2 per cent lower under a no-deal Brexit than if the UK leaves the EU with an agreement OBR says.
The OBR said in the executive summary that: ‘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 two per cent by the end of 2020 and is four per cent below our March forecast by that point.
‘Higher trade barriers also slow growth in potential productivity, while lower net inward migration reduces labour force growth, so the potential output is lower than the baseline throughout the scenario (and beyond).
‘The imposition of tariffs and the sterling depreciation raise inflation and squeeze real household incomes, but the Monetary Policy Committee is able to cut Bank Rate to support demand, helping to bring output back towards potential and inflation back towards target.’ Metro reports.
The paper quoted both Conservative leadership candidates Boris Johnson and Jeremy Hunt as saying they are prepared to leave the EU without a deal.
Further, it reports that Parliament could even be suspended to force through a no-deal after MPs voted earlier this year that they wanted to leave with some form of a divorce deal with the bloc.