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UK News No-deal Brexit would wipe 2% off coronavirus-hit UK economy in 2021 – OBR

19:20  25 november  2020
19:20  25 november  2020 Source:   pressassociation.com

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Office for Budget Responsibility believes economy would shrink by 2 % by end of 2020.

media captionChristine Lagarde has warned that a " no - deal " Brexit would entail "substantial costs" for the UK economy . "Any deal will not be as good as the smooth process under which goods, services, people and capital move around between the EU and the UK without impediments and obstacles."

A no-deal Brexit is forecast to wipe 2% off the economy next year and lead to a long-term decline in gross domestic product (GDP), according to the latest analysis.

a man wearing a blue hat: A no-deal Brexit would make the economy 2% smaller in 2021, according to the OBR (Jonathan Brady/PA) © Jonathan Brady A no-deal Brexit would make the economy 2% smaller in 2021, according to the OBR (Jonathan Brady/PA)

Trade talks between the UK and the European Union continue to be deadlocked as the December 31 cut-off date looms closer.

If there is no agreement by the end of the year then the UK is set to revert to World Trade Organisation terms with its largest trading partner, a move the Office for Budget Responsibility (OBR) has forecast could “reduce real GDP by a further 2% in 2021”, on top of the havoc wreaked by coronavirus.

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Andrew Bailey said failure to agree to deal would cause long-term damage to UK economy .

No - deal Brexit could wipe 2 % off GDP. Borrowing would rise by £30bn. “The report that the OBR have published this morning shows that even in the most benign version of a no - deal exit there would be a very significant hit to the UK economy , a very significant reduction in tax revenues and a big

The economic shock of the “various temporary disruptions to cross-border trade and the knock-on impacts” would continue for years to come, it predicted.

In its analysis, published to coincide with Wednesday’s Spending Review, the OBR said: “As these abate, the longer-term effects of lower trade intensity continue to build such that output is 1.5% lower than our central forecast after five years, and 2% lower in the long run.”

Employment would also suffer in the event of a no-deal outcome, it predicted.

The OBR forecasts that unemployment will peak at 8.3% in the third quarter of 2021 if there is no agreement – 0.9% higher than in its central forecast for the quarter.


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media captionPhilip Hammond: No - deal would cause 'significant hit ' to UK economy . The forecast used by the OBR is less severe than those of the Bank John McDonnell, Labour's shadow chancellor, said: "We know that a no - deal Brexit would devastate the UK economy and the public finances, and

The stand off pushes both parties toward a no - deal Brexit that would create a serious strain for companies. “For businesses, jobs and economic Johnson has repeatedly categorically ruled out delaying the final stage of Brexit beyond the end of 2020. Here’s what that no - deal outcome would

Even with a free trade agreement in place with Brussels, the OBR has held to its previous forecast that Brexit would “lower both export and import intensity over time”, and that productivity would drop by 4% in the long term compared with if the UK had remained a member of the EU.

In an update to MEPs, European Commission president Ursula von der Leyen said there was still no clarity on whether a deal would be signed.

Ursula von der Leyen holding her hand to her face: European Commission president Ursula von der Leyen gave an update on Brexit to MEPs (Olivier Hoslet, Pool via AP) © Provided by PA Media European Commission president Ursula von der Leyen gave an update on Brexit to MEPs (Olivier Hoslet, Pool via AP)

“I cannot tell you today if in the end there will be a deal,” she said.

The OBR said it was not satisfied that businesses or Government was ready for the changes Brexit would bring even if the current negotiations prove fruitful.

“We continue to assume that the UK and EU conclude a free trade agreement and that there is a smooth transition to the new trading relationship after the transition period ends on December 31 2020,” it said.

“However, there is evidence that neither the Government nor businesses are fully prepared for the imminent changes even if a deal is agreed.

“For example, the Bank of England’s decision maker panel survey for October reports that over a third of firms are either only partially prepared or not prepared at all.

“If an agreement is successfully concluded, we assume that officials on both sides of the border will display a degree of discretion in order to minimise disruption to trade.”

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