Risk of no-deal Brexit may have pushed UK into recession

The rising prospect of no-deal Brexit may have pushed the UK economy into a recession already, according to one of the country’s most respected economic forecasters.

With growth stalling, business investment stumbling and the pound falling sharply, the National Institute of Economic and Social Research (NIESR) said there was a one in four chance the country is already in a recession.

It added that risks to growth were “heavily weighted to the downside” because, it estimates, the chances Britain would leave the European Union without a deal were now around 40%.

The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

The Daily Telegraph said the group’s “gloomy set of forecasts” saw it predict that even if a no-deal Brexit is avoided, growth will slow to 1.2% this year and to 1.1% in 2020.

The Evening Standard said that NIESR believes that even if a no-deal departure could be done in an “orderly” way, it would still rule out any economic growth in 2020 and send inflation to over 4%, denting living standards for millions of families.

“With little positive momentum in the economy, output may contract again in the third quarter, and there is around a one-in-four chance of two consecutive quarters of negative growth,” said the NIESR.

It added that the outlook beyond 31 October, when the UK is due to have left the European Union, is “very murky” with the possibility of a “severe downturn” if there is a disorderly no-deal exit. Sterling would crash to be worth around $1.10.

The forecaster also warned that companies and households may have become “complacent” about preparing for a no-deal Brexit because two Brexit deadlines have already passed peacefully.

The news comes just days after the independent Office for Budget Responsibility warned that leaving the EU without a deal risked sending the country into recession and opening a £30bn hole in the public finances.