No-Deal Brexit Becomes More Likely, as Does a Recession in the UK

Posted Friday, July 19, 2019 by
Arslan Butt • 1 min read

According to UK’s Office for Budget Responsibility (OBR), a no-deal Brexit could send UK’s economy into recession, forcing it to contract by 2% in real terms by 2020. If this happens, this would be the first time the UK slips into recession following the financial crisis of 2009.

OBR has warned that leaving the EU without a deal could cause a significant fall in the value of the Pound, send house prices up to 10% lower. As the Pound weakens, government debt and cost of imported goods could rise higher. In addition, a no-deal Brexit could reduce foreign investment pouring into Britain until the economy stabilizes, putting further financial strain.

This becomes especially worrying in the face of increasing likelihood of a no-deal Brexit. According to a recent Reuters poll, the median forecast of a hard Brexit has gone up to 30% in July, from 25% in June and 15% in May. This is the highest likelihood since October 2017, and with the Brexit deadline only a few months away, this latest figure matters more.

The Reuters poll also reveals that the likelihood of a recession in the UK within the next year has climbed to 30% from 25%, while a recession within the next two years has gone up to 35% from 30% in June.

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