No-deal Brexit would 'push United Kingdom debt to 50-year high'

Andrew Cummings
October 8, 2019

"From a growth perspective, a Brexit deal is a little better, leaving growth at 1.5%, but it would leave no chance of Brexit being cancelled", he said.

However, the European Union will decide this week whether a Brexit deal is possible, which will fundamentally alter the decision course of parliament before the Brexit deadline.

The budget deficit is already set to exceed 50 billion pounds and that could easily double within a year if Britain crashes out of the European Union without a transition deal, the Institute for Fiscal Studies said in its Green Budget published Tuesday.

Deal or no-deal, ministers are determined to show they are getting on with Brexit as October 31 looms into view.

In a separate development, the President of the European Council, Donald Tusk, sent a public tweet to Boris Johnson, writing: "What's at stake is not winning some stupid blame game".

The NFU said the government has "severely undermined" the farming industry.

A no-deal Brexit would likely require a fiscal short-term stimulus followed by a swift return to austerity. It estimated that output could be over 5% higher in 2022 than it is today if the opposition Labour Party takes office. If Johnson wins, a no-deal exit is back on.

Revoking Brexit would lead to the best economic outcome.

The UK government has unveiled its proposed tariff plan in the event of a no-deal Brexit.

"Borrowing would rise to 92 billion pounds - equivalent to 4% of national income - by 2021/22 under a "relatively benign" no-deal Brexit scenario, in which there are no major delays at borders". Private consumption and investment growth falls while net trade is also a drag on growth. It predicted that the economy would not start to grow again until 2022, and then by just by 1.1%, "leaving it 2.5% smaller in that year under our base case".

Under a revised tariff regime, Britain said 88% of total imports by value are eligible for levy-free access and won't need to pay taxes.

The institute suggests that Brexit could be called off if a coalition of parties led by Labour triumph in a general election.

Crucially, this scenario assumes that smaller parties such as the Liberal Democrats and Scottish National Party would form a government with Labour, and limit the party's ability to implement some of its more radical policies.

"The outlook for borrowing has worsened dramatically since March", Emmerson said.

That's because higher taxes and changes to labor laws favored by Corbyn would make the United Kingdom less attractive to foreign investors and could trigger outflows of domestic capital.

In the short term, implementation of the full 2017 Labour manifesto would offset at least some of the economic benefits of remaining in the EU.

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