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Worst-Case Brexit Could Push U.K. into Deep Recession
Two reports today say the U.K. will be worse off economically no matter how it exits the European Union next spring.
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Two reports today say the U.K. will be worse off economically no matter how it exits the European Union next spring.
Prime Minister Theresa May is promoting a gradual exit that would begin the process in March as required under EU rules but give the U.K. and EU more time to work out post-Brexit trade deals.
A government analysis predicts the British economy will be at least 3.9% smaller after 15 years than it would be the U.K. remains in the EU. But a “hard” Brexit that strips Britain of all its current trade benefits with the EU could multiply the shortfall to 9.3%.
Separately, the Bank of England estimates that a “disorderly” Brexit will plunge Britain into its worst recession in decades, BBC News reports. The dire scenario says gross domestic product could shrink 8% in 2019, unemployment would rise to 7.5%, housing prices would drop 30% and commercial property prices would plummet 48%.
Under the worst-case scenario, the U.K. would revert to World Trade Organization rules that remain in place until 2022. The U.K. also would lose access to all trade agreements between the EU and countries outside the bloc. Economic growth would resume by mid-2019 but to reach its pre-Brexit level until mid-2023.
BOE emphasizes that it calculated multiple scenarios and has made no guess about which one will occur. But the bank calculates that even a “close” Brexit, in which the U.K. retains almost all its current EU benefits, would trim economic growth by 1%. The bank’s midpoint scenario would cut growth by 3.8% compared with remaining in the EU, BBC says.
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