No Deal Brexit ‘would lead to long recession’

A NO-DEAL Brexit would be likely to tip Britain into a recession as long as the downturn that followed the global financial crisis, analysts claimed last night.

The forecast from credit ratings agency Standard & Poor’s warned that property prices would slump while inflation would spike to more than 5 per cent.

S&P said the outcome had become more likely in recent months following deadlock with Brussels over the Irish border.

Although it still expected a Brexit agreement before next March – when the UK is scheduled to leave – it said the chance of ‘No Deal’ remained high enough to necessitate a warning to international investors on the potential challenges.

S&P has an AA credit rating for Britain – a step below its top-notch AAA rating – but it warned that any failure by London and Brussels to reach a deal would be likely to force it to cut the grade further.

It said Britain would experience a ‘moderate’ recession lasting four to five quarters in which the economy would shrink by 1.2 per cent in 2019 and by 1.5 per cent in 2020.

S&P said most of the economic loss of about 5.5 per cent of GDP over three years compared to if a deal was struck ‘would likely be permanent’. Unemployment would rise to above 7 per cent from around 4 per cent now and house prices would be likely to fall by 10 percent over two years.

Britain’s economy shrank by more than 6 per cent during the recession of 2008- 09, which lasted five quarters. Despite the warning, credit rating agencies have a patchy record.

They were widely criticised for their role in the financial crisis when they gave goldplated credit scores to packages of mortgage debt that turned out to be toxic and helped bring the financial system to the brink of collapse.

There were further warnings over No Deal yesterday from immigration minister Caroline Nokes, who said British travellers could face long delays at EU airports. It might mean they have to use ‘rest of the world’ passport queues instead of being fast-tracked through lanes set aside for EU nationals. Mrs Nokes said she was pinning her hopes on striking bilateral agreements with EU countries.

Speaking to the Commons home affairs committee on border preparations, she also said that in the event of no-deal firms would have to check the working rights of EU employees.

She admitted it would be difficult for them to know who had the right to work due to the time they have spent here because a new register is not expected to be set up in time.