Bank of England says worst-case Brexit more painful than global financial crisis
- 5 years ago
The Bank of England has warned that a "disorderly" Brexit could push the UK towards the biggest economic slump in modern memory.
For more on this and other news around the world we turn to our Ro Aram…
Aram… some worrying numbers given by the UK's central bank ….
That's right Mark… Just to clarify, the BOE's report on Wednesday is not an economic forecast….
It represents a worst-case scenario based on what it called a "disorderly" Brexit…. i.e. no trade deals, severe disruptions at borders and uncertain economic conditions.
Under those circumstances, the BOE said the British economy could shrink by eight percent just in the first five years after Brexit.
That would be a bigger slump than that experienced during the 2008 financial crisis.
It also predicted unemployment would rise to seven and a half percent and house prices would fall by 30 percent.
Inflation, it said, would spiral to six and a half percent, meaning the key interest rate could rocket to five and a half percent.
Currently, it's just a third of a percent.
In terms of the value of the pound, the BOE said it could crash by as much as 25 percent against major currencies.
The report also looked at other scenarios, such as a "disruptive" Brexit, where the UK retained access to some trade agreements.
In that case, the assumption is GDP would fall by three percent, house prices would by 14 and unemployment would reach just under six percent.
Wednesday's report comes as Prime Minister Theresa May is trying to persuade skeptical MPs to vote for her Brexit plan.
For more on this and other news around the world we turn to our Ro Aram…
Aram… some worrying numbers given by the UK's central bank ….
That's right Mark… Just to clarify, the BOE's report on Wednesday is not an economic forecast….
It represents a worst-case scenario based on what it called a "disorderly" Brexit…. i.e. no trade deals, severe disruptions at borders and uncertain economic conditions.
Under those circumstances, the BOE said the British economy could shrink by eight percent just in the first five years after Brexit.
That would be a bigger slump than that experienced during the 2008 financial crisis.
It also predicted unemployment would rise to seven and a half percent and house prices would fall by 30 percent.
Inflation, it said, would spiral to six and a half percent, meaning the key interest rate could rocket to five and a half percent.
Currently, it's just a third of a percent.
In terms of the value of the pound, the BOE said it could crash by as much as 25 percent against major currencies.
The report also looked at other scenarios, such as a "disruptive" Brexit, where the UK retained access to some trade agreements.
In that case, the assumption is GDP would fall by three percent, house prices would by 14 and unemployment would reach just under six percent.
Wednesday's report comes as Prime Minister Theresa May is trying to persuade skeptical MPs to vote for her Brexit plan.