The U.K. could already be in a technical recession and may face a severe downturn in the event of a no-deal Brexit, a leading think tank warned today. 

The uncertainty over the U.K.'s departure from the European Union, currently scheduled for October 31, has seen U.K. growth falter, the National Institute of Economic and Social Research said in its economic forecast. If a no-deal Brexit is avoided, the economy is forecasted to grow at around 1% in 2019 and 2020. In an orderly no-deal exit scenario, the economy is forecasted to stagnate, before starting to grow again in 2021. Tory leadership front-runner Boris Johnson, who is expected to become the new prime minister on Tuesday, said he would take the U.K. out of the European Union on October 31 "do or die." His rival Jeremy Hunt has also said he would be willing to leave the European Union without a deal if the bloc does not move on the controversial Northern Irish backstop.

The risk of a general election to break the Brexit impasse, and the policy uncertainty around a new government, is also weighing on the U.K. economy. NIESR predicts sterling could depreciate to around $1.10 if politicians fail to negotiate Britain's orderly departure from the European Union.

About the Author: Glen Callow

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