Recession for three years if we leave EU without a deal

As talks begin in Brussels, insurer’s bleak warning...

BRITAIN faces three years of recession, thousands of company failures and a £66billion-a-year slump in exports if it suffers a cliffedge exit from the European Union, according to a leading insurer.

The forecast predicts that without a transitional deal in 2019 to keep Britain temporarily in the EU, 3,300 more firms will go bust, the pound will be worth less than the euro, and the economy will shrink 1.2 per cent, staying in recession until 2021.

The doom-laden view comes from the world’s biggest trade insurer Euler Hermes, part of global insurance giant Allianz.

Ana Boata, an economist at Euler Hermes, said the idea of Britain completing a trade deal by the due date of March 2019 was ‘not realistic’. She added: ‘The new Government must endeavour to settle on a transitional deal, as it will be near impossible to finalise and ratify a free trade agreement at the same time as finalising the EU exit.’

The warning came after Brexit talks opened last week. Discussions on a new trade relationship will not even start until significant progress is made on the terms of Britain’s exit, notably on the status of EU nationals in Britain and a final bill to settle liabilities to the EU.

While the report said a transitional deal was the most likely outcome, it said there remained a one in five chance of no deal. Boata said that such a cliff edge exit would see sterling slump a further 20 per cent. Trade barriers would mean an annual loss to the UK of £30billion in exports of goods and £36billion in exports of services.

But the report says extending the deadline for a deal to 2021 would see the economy grow 0.9 per cent in 2019 and exports rise, albeit slowly, with the pound falling less sharply. There would be 1,000 more company failures.