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| No-deal Brexit 'would send UK into recession', forecasters fear - business live | No-deal Brexit 'would send UK into recession', forecasters fear - business live |
| (32 minutes later) | |
| Today’s OBR fiscal risks report will also analyse possible risks to the public finances from climate change. | |
| This may tackle the “tragedy of the horizon” - basically, once climate change becomes a defining issue for financial stability, it may already be too late [Bank of England governor Mark Carney gave a good speech on this recently] | |
| Foreign secretary Jeremy Hunt is discussing Brexit on Radio 4’s Today Programme now, and admitted that No-Dealt could be a ‘short-term’ economic shock | |
| Q: Will a no-deal Brexit be disastrous? | |
| Hunt argues that the 2016 referendum must be implemented, despite economic costs, saying: | |
| I don’t think anyone should minimise the fact there will be economic consequences to no deal. but we should also recognise that we are a democracy. | |
| We must do what we are committed to do in the referendum, | |
| Q: Democracy doesn’t pay for new schools and hospitals, money does. The chancellor says there is a £90bn cost from a no-deal Brexit over five years. [Brexiter Conservative MP] Jacob Rees-Mogg says we’d be richer. Who’s right? | |
| Hunt argues that Britain could ride out the ‘shock’ of leaving the EU without a withdrawal agreement. | |
| Even with the shock of a no-deal Brexit, over time we could make it work and we could flourish and prosper and we could indeed become richer as a country. | |
| [But] I wouldn’t minimise the fact there could be a short-term shock. | |
| Hunt also warned “European friends” that they would be blamed if Britain couldn’t get an acceptable deal, and crashed out of the EU: | |
| We would have European neighbours that had deliberately chosen to make the UK poorer, and that would change and harden British attitudes to Europe for a generation. | |
| That’s not something that wiser heads in Europe actually want. | |
| The OBR’s no-deal Brexit analysis will be based on work released by the International Monetary Fund in April. | |
| The IMF outlined a scenario under which there was no border disruption after a no-deal Brexit, but some new trade barriers were created by customs and regulatory border controls. | |
| Under this Scenario A, import costs rise (although the government sets tariffs at zero to limit the impact), immigration is restricted, and financial conditions tightened (making credit more expensive, say). | |
| The IMF calculated that this means UK GDP would be around 3.5% smaller in 2021 than if the country left with a deal. | |
| The Fund also modelled a second scenario (B) in which there are “significant border disruptions that increase import costs for UK firms and households”. That creates a much deeper recession, as this charts hows: | |
| This chart also shows that even after leaving with a deal (the yellow line), the UK economy is smaller than if the EU referendum had never happened. | |
| Good morning, and welcome to our rolling coverage of the world economy, the financial crisis, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial crisis, the eurozone and business. |
| A new healthcheck on Britain’s economy is expected to warn today that a no-deal Brexit would plunge the country into recession. | A new healthcheck on Britain’s economy is expected to warn today that a no-deal Brexit would plunge the country into recession. |
| The Office for Budget Responsibility (the fiscal watchdog) will outline how the UK economy would suffer if Britain fell out of the EU without a deal. | The Office for Budget Responsibility (the fiscal watchdog) will outline how the UK economy would suffer if Britain fell out of the EU without a deal. |
| Under the OBR’s no-deal scenario, the UK economy would contract in 2020, and end up 3% smaller in five years time. | Under the OBR’s no-deal scenario, the UK economy would contract in 2020, and end up 3% smaller in five years time. |
| The warning will come in the OBR’s new Fiscal Risks Report for 2019, released today. This is a serious, weighty report, looking at the strength and weaknesses of the UK public finances, and the threats which could undermine them in the future. | The warning will come in the OBR’s new Fiscal Risks Report for 2019, released today. This is a serious, weighty report, looking at the strength and weaknesses of the UK public finances, and the threats which could undermine them in the future. |
| It will include a fiscal ‘stress test’, measuring if the UK is really prepared to handle a wide range of topics including: macroeconomic and financial sector risks, specific revenue and spending risks, and balance sheet risks. | It will include a fiscal ‘stress test’, measuring if the UK is really prepared to handle a wide range of topics including: macroeconomic and financial sector risks, specific revenue and spending risks, and balance sheet risks. |
| The report is due at 9.30am, but The Times has already had a sniff of it. It reports: | The report is due at 9.30am, but The Times has already had a sniff of it. It reports: |
| Britain will slip into recession next year and the economy will be 3 per cent smaller if there is a no-deal Brexit, the UK’s official economic forecaster is expected to say today. | Britain will slip into recession next year and the economy will be 3 per cent smaller if there is a no-deal Brexit, the UK’s official economic forecaster is expected to say today. |
| The Office for Budget Responsibility is due to give its first assessment of the economic impact of a no-deal Brexit, including how it may affect household incomes, wages, employment and house prices. | The Office for Budget Responsibility is due to give its first assessment of the economic impact of a no-deal Brexit, including how it may affect household incomes, wages, employment and house prices. |
| The five-year forecast predicts that the economy will contract in 2020 as the UK officially enters into a recession, The Times understands. The economy is forecast to recover the following year, but GDP is still likely to be at least 3 per cent lower under a no-deal than if the UK leaves the EU with a deal. | The five-year forecast predicts that the economy will contract in 2020 as the UK officially enters into a recession, The Times understands. The economy is forecast to recover the following year, but GDP is still likely to be at least 3 per cent lower under a no-deal than if the UK leaves the EU with a deal. |
| THE TIMES: Young drivers face night ban #tomorrowspaperstoday pic.twitter.com/C1f3ox6QbB | THE TIMES: Young drivers face night ban #tomorrowspaperstoday pic.twitter.com/C1f3ox6QbB |
| The warning is well timed, with the two contenders to replace Theresa May both insisting that they would take the UK out without a deal if they become prime minister. | The warning is well timed, with the two contenders to replace Theresa May both insisting that they would take the UK out without a deal if they become prime minister. |
| Boris Johnson even waved an Isle of Man kipper at Tory members last night, in an odd attack on the burden which the European Union places on producers [But....the Isle of Man isn’t in the EU, but is following its food rules so it can trade, just like the UK would have to....] | Boris Johnson even waved an Isle of Man kipper at Tory members last night, in an odd attack on the burden which the European Union places on producers [But....the Isle of Man isn’t in the EU, but is following its food rules so it can trade, just like the UK would have to....] |
| Boris Johnson referencing kipper trade from the Isle of Man.Worth noting the Isle of Man isn’t part of the EU or the UK, but remains part of the customs territory of the Union. pic.twitter.com/GI7hOCW8iu | Boris Johnson referencing kipper trade from the Isle of Man.Worth noting the Isle of Man isn’t part of the EU or the UK, but remains part of the customs territory of the Union. pic.twitter.com/GI7hOCW8iu |
| With the pound already wallowing at a 27-month low this week, Brexit concerns are mounting. | With the pound already wallowing at a 27-month low this week, Brexit concerns are mounting. |
| We’ll have full coverage of the OBR’s report from 9.30am. | We’ll have full coverage of the OBR’s report from 9.30am. |
| Also coming up today | Also coming up today |
| UK consumers have kept the economy motoring along since the Brexit vote. New retail sales figures will show whether people are cutting back, or still spending thanks to rising wages. | |
| Economists predict a small drop in spending compared to May. A larger decline might intensify concerns about a recession. | Economists predict a small drop in spending compared to May. A larger decline might intensify concerns about a recession. |
| The agenda | The agenda |
| 9.30am BST: OBR publishes UK Fiscal Risks Report 2019 | 9.30am BST: OBR publishes UK Fiscal Risks Report 2019 |
| 9.30am BST: UK retail sales for June (expected to drop by 0.3%, including fuel). | 9.30am BST: UK retail sales for June (expected to drop by 0.3%, including fuel). |
| 1.30pm BST: US weekly jobless figures | 1.30pm BST: US weekly jobless figures |