No-deal Brexit risks deepening U.K. recession: budget watchdog

The consequences of a no-deal Brexit continued to pile up Thursday as the U.K.’s budget watchdog warned of a recession and diplomatic language appeared to break down between the two sides.

Britain’s Office for Budget Responsibility (OBR) said Thursday the U.K. might be entering a full-blown recession, and a no-deal Brexit could more than double the country’s budget deficit next year

The OBR said the world’s fifth-biggest economy appeared to have flatlined or possibly contracted in the second quarter, and the pace of growth “is likely to remain weak.”

“This raises the risk that the economy may be entering a full-blown recession,” it says in a report on the outlook for the public finances.

A no-deal Brexit would hurt confidence and deter investment and lead to higher trade barriers with the European Union, pushing down the value of the pound and causing the economy to contract by 2 per cent by the end of 2020, the OBR said, referring to forecasts by the International Monetary Fund.

A no-deal Brexit — something the two contenders seeking to be Britain’s next prime minister say they are prepared to do if necessary — could add 30 billion pounds (nearly $49 billion Cdn) a year to public borrowing by the 2020/21 financial year, the OBR said.

The OBR also said the spending and tax cut promises made by Boris Johnson and Jeremy Hunt, one of whom is due to become prime minister next week, would put a strain on the budget.

Boris Johnson, left, or Jeremy Hunt, leadership candidates for Britain’s Conservative Party, will replace Theresa May as U.K. prime minister as the budget watchdog warns of a recession. (Rebecca Naden/Reuters)

‘Running around like idiots’

If the United Kingdom opted for a no-deal, it would have to “face the consequences,” the European Union’s chief Brexit negotiator said in an interview to be published on Thursday.

Asked by the BBC what would happen if London tore up its EU membership card, Michel Barnier said: “I think that the U.K. side, which is well informed and competent and knows the way we work on the EU side, knew from the very beginning that we’ve never been impressed by such a threat. It’s not useful to use it.”

A pro-Brexit demonstator is seen outside Parliament in London on Wednesday, as the battle continued over how the departure will actually happen. (Henry Nicholls/Reuters)

Barnier, who spoke to the BBC before the current Conservative Party leadership contest, said the Withdrawal Agreement “is the only way to leave the EU in an orderly manner.”

The EU Commission’s first vice-president, Frans Timmermans, told the BBC that U.K. ministers were “running around like idiots” when they arrived to negotiate Brexit in 2017.

Timmermans said he was shocked by the standard of the British negotiation after initially expecting a brilliant show.

“We thought they are so brilliant. That in some vault somewhere in Westminster there will be a Harry Potter-like book with all the tricks and all the things in it to do.”

But then: “I thought, ‘Oh my God, they haven’t got a plan, they haven’t got a plan.'”

Preventing a prorogue

Meanwhile, British lawmakers were set to vote on Thursday on a measure aimed at making it harder for the next prime minister to try to force through a no-deal Brexit by suspending parliament.

Johnson, the front-runner to succeed Prime Minister Theresa May next week, has said Britain must leave the European Union on Oct. 31, with or without a deal, and has refused to rule out suspending Parliament to prevent lawmakers from trying to block his exit plan.

Opponents to Brexit are still hoping to see another vote or the process of leaving the EU somehow halted. (Hannah McKay/Reuters)

The measure being voted on does not go as far as an outright block on Parliament being suspended.

The result is likely to be very close; an earlier ballot on the measure last week passed by just one vote.

Those hoping to stop a no-deal Brexit believe this could require Parliament to be in session throughout the run-up to Brexit day, complicating any bid by Britain’s new prime minister to “prorogue,” or suspend, the legislature.

On Thursday, lawmakers will be asked to give final approval to the measure, which has since been strengthened by Parliament’s upper chamber, the House of Lords.

The Lords added a requirement that the government’s report on its progress in Northern Ireland would need to be approved by lawmakers, giving them a possible route to try to stop a no-deal such as attaching a vote to request a delay to Brexit.


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