No-deal Brexit could push UK into recession, think tank warns

The impact of Brexit disruption in the UK could spill over to the global economy, the OECD said

Caitlin Morrison
Wednesday 06 March 2019 11:38
Comments
What will happen to interest rates if no-deal Brexit goes ahead?

A no-deal Brexit could push the UK into a recession, which could then spread through the global economy, according to the Organisation for Economic Co-operation and Development think tank.

In its latest economic outlook, the OECD said growth is expected to remain weak in the UK for the foreseeable future.

Based on a smooth Brexit and a transition period lasting until the end of 2020, the OECD has forecast GDP growth of below 1 per cent in the next two years.

However, a no-deal Brexit would reduce GDP by around 2 per cent in the UK for the next two years. The OECD said: “The effects could be stronger still if a lack of adequate border infrastructure and a loss of access to EU trade arrangements with third countries were to cause serious bottlenecks in integrated cross-border supply chains.”

The group said the costs associated with a cliff-edge departure from the EU could be magnified by a further decline in business and financial market confidence and disruption in financial markets.

“In such a scenario, the likely near-term recession in the United Kingdom would generate sizeable negative spillovers on growth in other countries,” the OECD said.

Meanwhile, the think tank said the impact of trade arrangements on WTO terms would vary across the EU, with smaller countries like Ireland, the Netherlands and Denmark “relatively exposed”. The biggest impact would be felt in the agriculture, machinery and equipment sectors.

The OECD’s predictions echo previous warnings from the Bank of England, which last year said a no deal could plunge the UK into a larger recession that the global financial crisis 10 years ago if a no-deal Brexit goes ahead.

Based on the bank’s worst case scenario modelling, the UK economy would contract by 8 per cent, house prices would fall by a third, unemployment would spike to 7.5 per cent, interest rates would shoot up to 5.5 per cent and the value of the pound would fall to below $1.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in