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Thursday, March 28, 2024

Britain may be entering full-blown recession – watchdog

Anti-Brexit activists hold placards and wave Union and EU flags as they demonstrate near the Houses of Parliament in central London on January 28, 2019. – Despite the humiliating rejection of Prime Minister Theresa May’s Brexit deal, Britain is no closer to knowing the end result of its vote to leave the European Union. A raft of amendments to be voted on by MPs on Tuesday threaten to further muddy the waters as the clock ticks down to Britain’s scheduled departure from the EU on March 29. (Photo by Tolga AKMEN / AFP)
Agence France-Presse

Britain might be entering a full-blown recession and a no-deal Brexit could more than double the country’s budget deficit in 2019, the watchdog for public finances on Thursday said.

The Office for Budget Responsibility (OBR) said the world’s fifth-biggest economy appeared to have flat-lined or possibly contracted in the second quarter, some of which was probably “pay-back” after Brexit-related stock building in early 2019.

“But surveys were particularly weak in June, suggesting that the pace of growth is likely to remain weak.

“This raises the risk that the economy may be entering a full-blown recession,’’ it said in a report on the outlook for the public finances.

A no-deal Brexit would hurt confidence and deter investment and lead to higher trade barriers with the EU, pushing down the value of the pound and causing the economy to contract by two percent by the end of 2020, the OBR said, referring to forecasts by the International Monetary Fund (IMF).

A no-deal Brexit – something the two contenders seeking to be Britain’s next prime minister say they are prepared to do if necessary – could add 30 billion pounds ($37.4 billion) a year to public borrowing by the 2020/21 financial year, the OBR said.

The OBR said the spending and tax-cut promises made by Boris Johnson and Jeremy Hunt, one of whom is due to become prime minister next week, would put a strain on the budget.

“The spending control framework seems to be under pressure, with major announcements being made outside fiscal events, and the Conservative leadership making pledges that would prove expensive if pursued,’’ it said.

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