The UK’s economy will plunge into a recession if the nation departs from the European Union without a deal, the Office for Budget Responsibility said on Thursday.
The announcement was made in the independent body’s yearly fiscal risks report as the nation’s new EU exit deadline approaches.
The Office for Budget Responsibility said that real GDP will fall by 2% by the end of 2020 and is 4% below its March forecasts by that point.
“Heightened uncertainty and declining confidence deter investment, while higher trade barriers with the EU weigh on exports. Together, these push the economy into recession, with asset prices and the pound falling sharply,” the Office for Budget Responsibility said in its report.
“Higher trade barriers also slow growth in potential productivity, while lower net inward migration reduces labour force growth, so potential output is lower than the baseline throughout the scenario (and beyond),” it continued.
Earlier in April the UK was given yet another life line by the EU as it agreed to postpone Brexit for an additional six months until 31 October, a somewhat poetic ending to the UK’s time in the union.
Reactions to the possibility of a no-deal departure have been mixed. The Bank of England said earlier this month that the UK’s financial system is strong enough to cope with a “worst-case” disorderly Brexit in its Financial Stability Report.
However, 150,000 companies are “not fully ready” for the advent of a no-deal Brexit, Mark Carney said in June.
As the Halloween deadline approaches, the race to leadership of the Conservative Party is reaching its final lap as Boris Johnson and Jeremy Hunt battle for the position of Prime Minister.