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Thu, 2 April 2020

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No-deal Brexit could plunge the UK into recession, says OECD

No-deal Brexit could plunge the UK into recession, says OECD
2 min read

A no-deal Brexit could plunge the UK into recession and wipe 3% off economic growth, according to a major economic think-tank.

The OECD said the effects of leaving the EU without an agreement with Brussels in place "would be costly in the near-term".

Britain is due to quit the bloc on 31 October, and negotiations aimed at securing a new Brexit deal appear to be making little progress.

Both sides remain at-odds over how to replace the backstop arrangement designed to guarantee a continued open border between Northern Ireland the Republic of Ireland.

In a report published on Thursday, the OECD said: "A no-deal exit would be costly in the near term, potentially pushing the UK into recession in 2020 and reducing growth in Europe considerably.

“Even a relatively smooth no-deal exit, with fully operational border infrastructure, would have large costs.

“GDP declines by close to 2% in 2020, pushing the economy into recession given the baseline projection, with the near-term costs continuing to rise in 2021-22.”

According to the Paris-based body, Britain would come back out of recession and return to growth in 2021 and 2022, but at a weaker level than if it left the EU with a deal.

Laurence Boone, the OECD’s chief economist, said: “The best thing is to avoid a no-deal Brexit and to stay closely aligned to the EU as possible.”

Meanwhile the EU27 would see GDP 0.5% lower in 2020 with a no-deal Brexit, with Ireland hit hardest.

The figures are within an overall bleak forecast for the global economy, with the think tank calling them “the weakest annual growth rates since the financial crisis”.

In response, Shadow Chancellor John McDonnell said: “This report is a clear and stark warning of what we face if Johnson takes this country over the cliff edge of no deal Brexit.

"It confirms the absolute necessity of preventing this needless threat to our economy.”

Lib Dem deputy leader Ed Davey said: “Any cuts to economic growth will hit people hardest in their pockets and will surely see us regress back into a recession.

“No deal would mean cuts to the NHS, cuts to schools and cuts to the police. This new analysis shows that Brexit would bring chaos for our public services.” 

Mr Davey added: “Boris Johnson should be ashamed that he is dragging the country down this rabbit-hole.

“And Sajid Javid, as Chancellor, should not be standing alongside him as he causing the UK to crash out of the EU, and crash our economy.”

The Government has been approached for comment.




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