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UK may be entering full-blown recession: budget watchdog

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UK may be entering full-blown recession: budget watchdog

 

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FILE PHOTO: People walk through the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson/File Photo

 

LONDON (Reuters) - Britain might be entering a full-blown recession and a no-deal Brexit could more than double the country’s budget deficit next year, the watchdog for public finances said on Thursday.

 

The Office for Budget Responsibility said the world’s fifth-biggest economy appeared to have flat-lined or possibly contracted in the second quarter, some of which was probably “pay-back” after Brexit-related stock building in early 2019.

 

“But surveys were particularly weak in June, suggesting that the pace of growth is likely to remain weak. This raises the risk that the economy may be entering a full-blown recession,” it said in a report on the outlook for the public finances.

 

A no-deal Brexit would hurt confidence and deter investment and lead to higher trade barriers with the European Union, pushing down the value of the pound and causing the economy to contract by 2% by the end of 2020, the OBR said, referring to forecasts by the International Monetary Fund.

 

A no-deal Brexit - something the two contenders seeking to be Britain’s next prime minister say they are prepared to do if necessary - could add 30 billion pounds ($37.4 billion) a year to public borrowing by the 2020/21 financial year, the OBR said.

 

The OBR said the spending and tax cut promises made by Boris Johnson and Jeremy Hunt, one of whom is due to become prime minister next week, would put a strain on the budget.

 

“The spending control framework seems to be under pressure, with major announcements being made outside fiscal events, and the Conservative leadership making pledges that would prove expensive if pursued,” it said.

 

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-- © Copyright Reuters 2019-07-18

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1 hour ago, geoffbezoz said:

Thanks to the Brexit fools that is. As I said before, the UK will soon be vying with Greece as the poor man of Europe.

Yes, Brexit will inevitably be bad for UK economics. But no, it won't reduce the UK to Greece. On the one hand it's a universally observed rule of economics that the geographically closer countries are to each other the more trade they do with each other.. So the cries of we'll find new markets to replace the ones we've lost are nuts. On the other hand, the UK will be trading on the same terms with the EU as the USA now does. And that's a huge volume of trade. And that's because most tariffs are very low or nonexistent. And in the case of integrated supply lines between the rest of the EU and the UK, that will hurt manufacturing. But most of the UK economy is in services. So that impact is limited.

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2 hours ago, mike787 said:

Now what happens if the sterling tanks, what will be the value against the Baht???  Not looking good for the British pound especially with Brexit.

For someone who can’t afford to be in Thailand the prospect of others being forced to leave by a collapsed pound might be something to make themselves feel better.

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15 minutes ago, Loiner said:

More project Fear from those with vested interests to Remain. Lots of ‘could’ ‘would’ ‘might’ ‘maybe’.
It’s up to business and the govt to prepare properly to prevent all the dire predictions. Have they never heard of Risk Management?


Sent from my iPhone using Thaivisa Connect

Have you never heard of an Act of God? Some things you just can't adequately prepare for unless you want to defy economic history.

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4 hours ago, BritManToo said:

Project Fear, still trying.

Amazed the UK economy is the world's 5th largest.

The other 26 odd EU countries economies must be shit.

They must be pooping themselves as a no-deal Brexit approaches.

 

How will they cope without the UK paying for them all?

 

1) UK _was_ the 5th largest economy while it was still part, and thanks to being part, of the EU.

2) the EU globally is/was the 2nd largest.

3) btw Germany and France are 4th/6th, not exactly "shit"

3) perhaps you should consider that the UK was not only paying, but also receiving princely from the EU

 

This said, I don't know/care about Project Fear, I just hope the dear UK friends get soon what they voted for, then have been dragging their feet to delay, and bothered the rest of the EU for far too long about.

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