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The fiscal watchdog issued the warning Thursday in a paper outlining the task it faces to assess the economic and fiscal consequences of Britain leaving the European Union.
Its current projections are based on the assumption that the two sides reach an agreement but a no-deal Brexit could hit the British economy hard, leading to higher budget deficits and government debt, the OBR said.
“A disorderly exit is not impossible and it could have a severe short-term impact on demand and supply in the economy and on the public finances,” the OBR said. “U.K. asset prices could fall sharply which, together with heightened uncertainty, would cause households and businesses to rein in their spending.
“A fall in the pound would also raise domestic prices, squeezing households’ real incomes and spending,” it added. “And there could be temporary constraints on supply if, for instance, a lack of customs preparedness led to significant delays at the border.” [...]