Written by: Keith Tully
Published: 18th July 2019
The UK economy is likely to be plunged into recession in the aftermath of a No Deal Brexit, according to the Office for Budget Responsibility (OBR).
The government’s independent financial forecasting body has conducted an in-depth assessment of the prospects for the economy in the event of the UK leaving the EU at the end of October without having reached a deal on the terms of departure.
In fact, the organisation has said that a 2 per cent contraction in the overall scale of the British economy should be expected for 2020, if a No Deal Brexit takes place later this year.
Government borrowing would be likely to increase by around £30 billion a year and unemployment levels could be pushed up to around 5 per cent in the event of No Deal, the OBR has said.
Furthermore, house prices would be expected to tumble by around 10 per cent in 2020 if the UK leaves the EU without a deal in a few months’ time.
Chancellor Philip Hammond told Reuters in an interview that he “greatly” fears the potential impact that a No Deal Brexit might have on the British economy and the public finances.
“The report that the OBR have published this morning shows that even in the most benign version of a no-deal exit there would be a very significant hit to the UK economy, a very significant reduction in tax revenues and a big increase in our national debt – a recession caused by a no-deal Brexit,” Mr Hammond said.
The chancellor went on to express concern about the potential impact of a “much harder version” of Brexit that some politicians are currently lobbying for.
“They are talking about a much harder version which would cause much more disruption to our economy and the OBR is clear that in that less benign version of no deal the hit would be much greater, the impact would be much harder, the recession would be bigger,” he said.
The OBR has previously refrained from predicting what impact a No Deal Brexit might have on the British economy because it was assumed until recently that a deal agreed between the UK and EU governments would need to be approved by MPs in Westminster in order for Brexit to take place.