The UK will begin to suffer a lengthy economic recession if Prime Minister Theresa May fails to reach a Brexit deal with the European Union, experts warn.
Britons will experience rising unemployment and inflation rate as well as falling household incomes all of which will result in a recession in case of “no-deal” Brexit, according to an analysis by the global rating agency Standard & Poor’s.
“Unemployment would rise from current all-time low of 4% to 7.4% by 2020 – a rate last seen in the aftermath of the financial crisis,” it said.
“House prices would likely fall by 10% over two years” and “household incomes would be £2,700 lower a year after leaving without a deal,” it added.
There would also be a downgrade to the UK’s credit rating, which would lead to a rise in the Treasury’s borrowing costs, warned S&P, adding it still expected both the UK and the EU to strike a deal before next March, when the UK is scheduled to leave the bloc.
In addition, it said that due to the high chance of “no-deal” Brexit, it had to warn international investors about the potential challenges moving forward.
The EU and Britain had hoped to reach a deal on Brexit by October. However, hopes for such an agreement were dashed last month during an informal EU summit in Austria where EU leaders criticized Britain’s proposals on trade and the future state of the border in Ireland.
The talks stalled as May resisted the EU’s so-called backstop plan for including Northern Ireland in the customs union until a solution is found for bilateral trade.
Arguing that the solution will effectively separate Northern Ireland from the rest of the UK, May has instead urged the bloc to include the entire UK in the customs union in the transition period, which will start as of March 29, 2019, and even beyond that.