UK Economy In Recession Risk As Brexit Nears: Study

Britain’s economic growth is stagnating and there is an apprehension that the Brexit crisis has already pushed the U.K economy into a recession, according to a leading think tank.

The findings of the study by the National Institute of Economic and Social Research (NIESR) say that Britain’s economy is facing headwinds and are “heavily weighted to the downside” as chances of the country leaving the European Union (EU) without a deal looks 40 percent.

“There is no palpable growth for some years to come following a no-deal Brexit,” noted NIESR director Jagjit Chadha at a news conference.

Even if Britain manages to strike a Brexit deal, the public finances will still take a hit, NIESR said.

With Brexit hardliner, Boris Johnson leading the leadership race as the next Prime Minister, a no-deal exit may be a logical outcome.

Economic outlook beyond October is bleak

The NIESR study notes that Britain’s economy has shrunk in the April-June quarter. If it gets squeezed up again in the third quarter, Britain will formally fall into its first recession ever since the global financial crisis of 2008.

The think tank is not alone in voicing recession fears about the U.K. The budget office of Britain also had warned of a full-blown recession ahead.

In a report on Monday, it said growth prospects of the economy for the coming quarters are looking bleak.

“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,” it said.

NIESR also slashed its outlook on Britain’s economic growth for 2019 and 2020 to 1.2 percent and 1.1 percent from the erstwhile 1.4 percent and 1.6 percent respectively.

No-deal Brexit will escalate deficit and debt

The study says there is a 30 percent chance that the world’s fifth-largest economy shrinking in 2020 as well, taking into account all sorts of Brexit scenarios.

“Some loosening of the public purse appears inevitable and we expect public sector borrowing to rise above 2 percent of GDP with substantial over-runs of the government’s fiscal objectives in the event of a no-deal Brexit,” it said.

Wage hike announced for public sector workers

Meanwhile, Chancellor Philip Hammond on Monday announced a wage rise for all public sector workers to beat the country’s 2 percent inflation rate.

The move comes days before Prime Minister Theresa May is to demit office, and Hammond will also resign as chancellor.

The wage hike will benefit one million public sector workers.

Among the government workers, teachers will get a 2.75 percent salary hike; doctors can expect an extra £1,500 ($1870) in their pay while police personnel will add £978 ($1220) to their pay pack. The armed forces in the U.K. will also gain from the wage hike.