Brexit: Britain’s trade elections could prolong the worst recession in 300 years

The Office of Budgetary Responsibility said on Wednesday that a no-deal Brexit would reduce production by 2% next year and leave the UK economy 1.5% smaller after five years compared to a scenario where Prime Minister Boris Johnson enters into an agreement with Brussels.

Johnson has some time left to secure a new trade agreement with the European Union, but the United Kingdom is facing a serious economic situation, even if an agreement is reached. The Office of Budgetary Responsibility expects GDP to fall by 11.3% this year, the largest decline in annual production since the great frost of 1709, Europe’s coldest winter in 500 years, which caused extensive death and destruction of agriculture.

And even with a Brexit deal, the watchdog said the economy is likely to experience permanent “scarring” that will reduce production by 3% under its central scenario, where coronavirus restrictions are kept in place until spring.

On Wednesday, Finance Minister Rishi Sunak unveiled a spending plan of £ 4.3 billion ($ 5.7 billion) to help prevent unemployment through measures such as subsidized work for young people and increased capacity at job support centers.

The Office of Budgetary Responsibility expects unemployment to rise to 7.5% in the second quarter of next year, meaning 2.6 million people will be out of work – 1 million more than the current level. If no Brexit agreement has been agreed, unemployment will reach 8.3% in the third quarter of 2021 and the recovery from the pandemic will take until the third quarter of 2023 instead of the end of 2022.

“Our state of health is not over yet and our financial emergency has just begun,” Sunak told parliament in a speech. The British government is spending £ 280 billion ($ 373 billion) on aid measures to get the country through coronavirus, he added.

Brexit warnings

“It takes much longer for what I call the real side of the economy to adapt to the change in transparency and to the change in profile in trade,” he said in testimony Monday before Parliament’s Finance Committee.

Even if the UK and the EU reach an agreement, UK companies will still face additional costs of doing business, such as those relating to border controls and customs rules at a time when many are suffering from the impact of the pandemic on trade.

– Charles Riley contributed reportg.