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Amid concerns that all developed countries will experience slower growth next year, the Paris-based club for the world’s 35 richest states warned that the UK would take the biggest hit if the government failed to secure an agreement with the EU.
OECD analysis estimates that losing unfettered access to EU markets after 31 October will probably plunge the UK into recession next year. The loss of trade, investment and technical knowledge plus a further fall in the pound will prolong Britain’s growth rate until at least 2022.
Laurence Boone, the OECD’s chief economist, said an agreement to smooth Britain’s exit was important to protect businesses and the economy. “The best thing is to avoid a no-deal Brexit and to stay closely aligned to the EU as possible,” she said.
The OECD said an agreement before the 31 October deadline would limit the fall in the UK’s rate of GDP growth to 0.9% in 2020 from 1%this year, down 0.2 percentage points from its May forecast.
But leaving the EU without a deal would lead to a contraction of 1% next year and a further 0.5% hit to growth in 2021 and 2022. [...]
In comments that will be considered among the gloomiest from the OECD since the 2008 financial crisis, Boone said she was concerned that after two years of heightened uncertainty created by tit-for-tat trade wars and Brexit negotiations, the depressed state of the global economy risked becoming permanent.
“The concern is that with high levels of uncertainty going on for so long that we run the risk of low levels of trade and investment becoming entrenched. And that would leave countries even more exposed to a financial shock,” she said. [...]