The U.K. could be dragged into a recession if it implements a no-deal Brexit, with the economy shrinking by 2% and taking a £30 billion hit, an independent forecasting body warned on Thursday.
The Office for Budget Responsibility (OBR) said growing uncertainty over the Brexit negotiations and a lack of confidence in future leaders’ ability to negotiate the deal would deter investors from doing business in the U.K., which could hurt trade.
“The big picture is that heightened uncertainty and declining confidence deter investment, higher trade barriers with the EU weigh on domestic and foreign demand, while the pound and other asset prices fall sharply,” OBR Chairman Robert Chote told a press conference covering the launch of its new fiscal report.
“Together, these push the economy into recession, with asset prices and the pound falling sharply,” the OBR said in its latest fiscal report, adding its projection that “real GDP falls by 2% by the end of 2020 and is 4% below our March forecast by that point.”
The independent forecaster warned that leaving without a deal would cost the British economy £30 billion and that the disruption and chaos that would follow a no-deal Brexit would pose a grave threat to public finances.
Tory party prime ministerial frontrunner Boris Johnson has repeatedly said that he would ensure the U.K. leaves the EU on Oct. 31 with or without a deal and would prefer a no-deal Brexit.
By Muhammad Mussa in London