Britain might be entering a full-blown recession that a no-deal exit from the European Union would compound, blowing a 30 billion-pound hole in the public finances, a budget watchdog said. The Office for Budget Responsibility said the economy probably flat-lined or might have contracted in the second quarter.
Some of that weakness may have been payback after a rush to build up inventories before the original Brexit deadline in March.
“But surveys were particularly weak in June, suggesting that the pace of growth is likely to remain weak,” the OBR said it said in a report on the outlook for the public finance.
“This raises the risk that the economy may be entering a full-blown recession.”
Britain’s economy slowed by less than feared after the 2016 Brexit referendum. But many investors are worried about a sharp downturn now with the latest Brexit deadline approaching on Oct. 31 and the world economy slowing because of trade tensions.
A no-deal Brexit could cause the economy to contract by 2% by the end of 2020, the OBR said, referring to International Monetary Fund forecasts.
It could also add 30 billion pounds (US$37.4 billion) a year to public borrowing by the 2020/21 financial year, the OBR said, more than doubling the expected deficit.