What Would Happen To The UK In A No Deal Brexit?

As the UK braces itself for another parliamentary vote on the PM’s Brexit plan tomorrow, the risk of a no deal Brexit is growing.

If parliament votes against the government again, it will be offered a vote on Mach 14th). This vote will be to decide whether to press ahead with a no deal Brexit or pursue an extension to the deadline of March 29th.

With everyone from businesses to the BOE warning against the damage of a no-deal Brexit, let’s take a look at the consequences such an outcome might entail.

Economic Contraction

Government forecasts leaked last year indicate that leaving the EU without a deal could cause a severe economic shock for the UK. In such circumstances, the economy could contract by around 8% over a 15-year term following the departure date. This would be the biggest downturn in UK peacetime history.

Inflation up, Interest Rates Up

The BOE recently cut its growth forecasts due to the uncertainty around the Brexit outcome. It has warned that a no deal would cause a catastrophic shock to the UK economy, far worse than the 2008 global financial crisis. This could see interest rates rise as high as 5.5% as inflation soars to around 6.5%.

Housing Market Crashes & Unemployment Surges

The BOE governor, Mark Carney, also warned that the UK housing market could collapse by around 30%. He cautioned that commercial property prices could crash by nearly 50%. Alongside this downturn in home prices, unemployment could skyrocket from current lows to as high as 7.5%.

British Pound to Collapse

If the UK leaves without a deal, the BOE currently projects that the currency exchange rate between GBP and both USD and EUR could collapse by around 25%. This would lead to sharp, negative consequences for UK families traveling abroad. It would also significantly impact businesses importing to the UK.

Trade to Become A lot More Difficult

Since joining the EU, Britain has enjoyed tariff-free trading with its many EU trading partners. However, following Brexit, the UK will once again become subject to tariffs when trading with other EU countries.

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