UK Could Plunge Into Recession Without Brexit Deal
The threat of Brexit has already caused serious damage to the UK economy. The looming departure has meant three years of uncertainty for British companies, crushing business investment and weakening the country’s housing market.
The UK Office of Budget Responsibility (OBR) warned Thursday that “heightened uncertainty and declining confidence” would deter investment while higher trade barriers would slam exports.
“These push the economy into recession, with asset prices and the pound falling sharply,” said the government’s budget watchdog. UK stock markets would fall 5%, while the pound would plummet 10%. GDP would shrink by 2% by the end of 2020, again CNN estimated.
The report is a stark warning ahead of October 31, the latest deadline for Britain to depart the European Union.
Boris Johnson, the frontrunner to succeed Theresa May as prime minister next week, has said that he’d be willing to force Brexit on that date if he’s unable to negotiate a new exit deal with EU officials.
The potential consequences of such a departure are generating alarm, and hurting the pound. It sank to a two-year low below $1.24 earlier this week.
The economic fallout of that scenario would be worse than Britain suffered because of the global financial crisis.
The watchdog said that leaving without a deal would force the UK government to borrow an extra £30 billion ($37.4 billion) per year starting in 2020.
Meanwhile, the European Union is sticking to its guns. The bloc has said that it’s unwilling to make significant revisions to the Brexit agreement it negotiated with May.
Asked what would happen if Britain simply tore up its EU membership card, Michel Barnier, Europe’s chief Brexit negotiator, said in a BBC interview that “the UK would have to face the consequences.”