Without an agreement, Brexit would have sent a pound, and it would have led to a worse recession than the financial crisis, warned the Bank of England.
He said that the UK economy could shrink by 8% in the near future if there is no transition period, while housing prices could fall by almost a third.
The Bank of England also warned that the pound could fall by a quarter.
Bank analysis comes after the Treasury reported that the UK will be worse in any form of Brexit.
This Bank scenario is not what it expects, but represents the worst scenario, based on the so-called “promiscuous Brexit”.
The scenario considers a five-year period after the UK’s exit from the EU.
But by the end of 2023, an economic recovery is expected.
- What have we learned from the Bank of England?
- Brexit makes the UK worse, the government warns
“These are scenarios that are not predictions. They illustrate what may not necessarily happen, which is likely to happen.
“Taken together, the scenarios emphasize that the influence of Brexit will depend on the direction, magnitude and speed of the effect of reduced openness of the economy Uk,” said Bank of England Governor Mark Carney.
What is “promiscuous brexit”?
The Bank of England has made a number of assumptions – not predictions – about what may cause disorderly Brexit.
- UK back to World Trade Organization rules
- By 2022, new deals are not related
- UK loses all access to existing trade agreements between the EU and a third country
- Severe border violations due to customs checks
- Migration is canceled from 150,000 to 100,000
The Bank of England does not give the likelihood of this.
What happens during this messy scenario?
Scenarios compiled by the Bank of England show that GDP will fall by 8% in 2019 against its current forecast.
Growth will resume quickly, and the economy will expand again by the end of 2023, but will be less than before.
Unemployment will rise to 7.5%, housing prices will fall by 30%, and prices for commercial real estate – by 48%.
Interest rates reached 4%.
What other scenarios were considered by the Bank of England?
The bank considered three other scenarios.
He also reviewed the “destructive” Brexit – the one where the UK retained access to some trade agreements.
He also looked at what might happen if trade agreements are agreed to give the United States “close” relations or what they describe as “less close” relations.
Close relations are without customs checks, regulatory barriers and partial agreements on financial services.
A less close relationship is when customs checks begin after 2021, and other regulatory checks are established.
What happens in these scenarios?
If Brexit is destructive, not indiscriminate, GDP falls by 3% in the five years to 2022, housing prices decline by 14%, and unemployment reaches 5.75%
If close trade relations are reached, the economy can still be 1% less than if the UK remained in the EU, but 1.5% above the latest bank estimate.
If it is less close, growth may be 3.75% less than if the UK remained in the EU and 0.75% higher than the forecast compared with the latest inflation report.
These figures cover the period up to 2023.
Why does the Bank publish these numbers?
Brexit's destructive and erratic scenarios are contained in the semi-annual review of financial stability.
Immediate and less similar scenarios are published upon the request of the Treasury Committee of Deputies on the impact of Brexit on the Bank’s ability to fulfill its authority to maintain financial stability and curb inflation at 2%.