A no-deal Brexit would shrink the UK economy ‘by 9.3%’

29 Nov 18

Analysis from both the government and Bank of England have warned the UK economy could “suffer a severe economic shock” in the case of a no-deal Brexit.

Theresa May’s draft Brexit proposal will also leave the UK economy worse off, according to government figures released yesterday.

Leaving the EU with no deal would shrink the economy by 9.3% over the next 15 years, calculations by the Department for Exiting the European Union showed.

DExEU’s report noted that even with the prime minister’s suggested plan, the UK economy could reduce the economy by 3.9% over the next 15 years.

In separate analysis released on the same day, the BoE estimated that a no-deal – or “disorderly” - scenario could see GDP drop by 8% from its level in the first quarter of 2019.

The report said that the Financial Policy Committee, a committee of the BoE, had “reviewed a disorderly Brexit scenario, with no deal and no transition period, that leads to a severe economic shock”.

A comparison between the economic effect of the global financial crisis and a no-deal Brexit revealed that the latter would be more severe.

The BoE’s report estimated that a no-deal scenario would result in a ‘peak to trough’ economic decline of 8%, compared to the 6.25% as a result of the global financial crisis.

House prices, the BoE said, would fall by 30%, compared to a fall of 17% in the 2008 collapse.

The BoE analysis looks at a five year period after Brexit, whereas DExEU’s analysis is based on a timescale of 15 years.

A Public Accounts Committee report published this week warned of major disruptions at UK ports in the case of a no-deal Brexit.

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