2019.07.2208:25:00UTC+00Brexit Likely Pushed UK Economy Into Recession, NIESR Says

The UK economy may have already entered a recession and the outlook beyond October is very murky with the possibility of a severe downturn in the event of a disorderly no-deal Brexit, the National Institute of Economic and Social Research, or NIESR, said in a report on Monday.

The think tank said there is one-in-four chance that the economy has already entered a technical recession.

On the assumption that a no-deal Brexit is avoided, the economy is forecast to grow 1.2 percent this year, but this was revised down from 1.4 percent projected previously.

Likewise, the outlook for 2020 was lowered to 1.1 percent from 1.6 percent as the Brexit uncertainty continues to weigh on investment and productivity growth remains weak.

Inflation is seen at 2 percent target this year, before rising slightly to 2.1 percent in 2020.

In the event of an orderly no-deal Brexit, the economy is forecast to stagnate, before starting to grow again in 2021.

Given the slow underlying growth in the UK and the fragility of the global economy, the NIESR projected 30 percent chance of the economy contracting next year.

The NIESR forecast some loosening of the public finances going forward. The public sector borrowing is expected to exceed 2 percent of GDP, with the possibility of substantial over-runs of fiscal objectives in the event of a no-deal Brexit.

Earlier in the day, the Confederation of British Industry said the next UK Prime Minister should restore confidence and take action to bring the economy back on track.

Carolyn Fairbairn, the CBI Director General, called for a clear direction for the UK and sought a long-term vision that drives in investment and back business as a foundation of a growing, inclusive economy.