With Brexit negotiations going down to the wire (again) it looks increasingly likely that the UK will “crash out” of the European Union without a deal if the EU refuses to grant another extension. This would be very damaging to the British economy and the world economy generally, compounding the uncertainty and flagging manufacturing figures already resulting from the U.S.-China trade dispute, according to analysts from Bloomberg Economics. No surprise, however, the UK itself would suffer the biggest hit.
- Bloomberg’s analysts predict that a no-deal Brexit would tip the UK into recession, while the rest of the EU would suffer a loss in economic growth equal to anywhere from 10% to 30% of the British loss. A slowdown in growth towards that higher end of the range could easily spell recession for the EU as well.
- A European recession would inevitably have broader, global effects. Bloomberg quoted New York University Professor Nouriel Roubini, who predicted that “a blowup over Brexit might not by itself cause a global recession, but it would certainly trigger a European one, which would then spill over to other economies.”
- Meanwhile Open Europe, a British think tank, has some suggestions for how to minimize disruption and return the country to growth following a no-deal Brexit. These include providing more certainty for EU nationals living in Britain by reaching a bilateral deal with the EU on citizens’ rights; adopting pre-clearing systems for trucks to keep non-compliant haulers away from ports that otherwise will be overwhelmed; let businesses know what long-term tariffs will be (beyond 12 months); provide short-term support for the sectors of the economy most affected by no-deal Brexit; and reforms to spur competitiveness, as well as reducing income tax or corporation tax to stimulate the economy.
- One thing Open Europe advises not to do: business shouldn’t hold its breath for a trade deal with the U.S. anytime soon, as a free trade agreement faces numerous political hurdles on both sides of the Atlantic (think “chlorinated chicken”).