The United Kingdom is expected to enter recession in the event of a Brexit, without agreement, announced the Office for Budget Responsibility (OBR) in its economic forecasts released on Thursday.
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“The United Kingdom will enter into recession in the fourth quarter of 2019, for a period of one year. The GDP will fall by 2.1%,” says the report by the OBR, the institute for british official in charge of economic and fiscal forecasting. The british pound could fall further 10% immediately after the start of the british EU 31 October, in this scenario, according to the OBR.
The two candidates at 10 Downing Street, Boris Johnson and Jeremy Hunt, have not ruled out the idea of a british exit from the EU without agreement, an event for which the International Monetary Fund (IMF) has prepared two scenarios, a “no-deal” tough ” and a “no-deal peel”.
The forecasts of the OBR are based on a scenario of “no-deal peel”. In this case, a tariff regime, temporary announced by the government should allow 87% of the imported products to be exempt from import duty for one year, before moving to the rates for the “most favoured nation” by the European Union, which are around 4%. The 13% of remaining products would, however, be subject to immediate customs tariffs.
In addition, the arrival of non-tariff barriers to trade with the EU would lead to an increase in the prices of imported commodities, and net immigration to the Uk would decrease by 25,000 persons per year, by the end of the decade, reducing the available workforce.
According to the OBR, the british pound could fall by 10% immediately after the start of the british EU 31 October in this scenario without an agreement. The residential property prices would fall by almost 10% between the beginning of 2019 and the end of 2021.
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By mid-2021, GDP would be 4% lower than anticipated by the OBR in march last in the case of a Brexit with agreement. However, the economy is likely to pick up somewhat thereafter, and in early 2024 the GDP would actually be lower than the 1.6% that the OBR expected in the event of a Brexit with agreement.
