UK economic outlook 'very murky indeed' thanks to looming no-deal Brexit, says think tank

PUBLISHED: 15:26 22 July 2019 | UPDATED: 15:26 22 July 2019

A think tank has said there is a one in four chance that the UK is already in recession as a result of Brexit. Photo: Dominic Lipinski/ PA Archive/PA Images

A think tank has said there is a one in four chance that the UK is already in recession as a result of Brexit. Photo: Dominic Lipinski/ PA Archive/PA Images

PA Archive/PA Images

A leading think tank has said it is possible the UK economy is already in recession as a result of the uncertain prospect of a no-deal Brexit.

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Advance details of a report to be published by the National Institute of Economic and Social Research (NIESR) said that economic growth has stalled and puts the chance of the UK already being in a recession at one in four.

"The outlook beyond October, when the United Kingdom is due to leave the European Union, is very murky indeed with the

possibility of a severe downturn in the event of a disorderly no-deal Brexit," summarised the report.

The NIESR forecasts come after Catherine McGuinness, the political leader of the City of London, warned that a no-deal Brexit could hit the financial district hard.

READ: City chief warns Boris Johnson: no-deal Brexit could take us 'from a joke to a nightmare'

The NIESR made forecasts in the various cases of having a withdrawal agreement, a no-deal Brexit, and a "disorderly" no-deal Brexit.

Even assuming we leave the EU with a withdrawal agreement, growth is forecast to be slow as businesses hold back on investment in the light of uncertainty regarding future trading relations. In this scenario, the economy would grow at around 1%, while a no-deal scenario would stall growth entirely until 2021.

"Some loosening of the public purse appears inevitable," summarised the report. However, those gestures are unlikely to make much of a difference to the bigger picture, it said.

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"Given the slow underlying growth rate of the UK economy, the fragility of the global economy, and the significant risk of an abrupt downward shift at the end of this year, we judge that there is around a 30% chance of output growth of less than zero per cent in 2020," wrote the report's authors.

The full NIESR report will be released on Wednesday.

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