The Treasury and Bank of England should prepare for a three-pronged economic shock from ‘no deal’

a post by Jack Leslie for the Resolution Foundation blog

It’s a well-worn trope that no one knows what the economic impact of a no deal Brexit would be. And for good reason. The scale of disruption at the border, in supply chains and in the wider economy, is impossible to predict with any accuracy. Much would depend on the timing and the success of the government’s preparations.

This is why estimates of the hit to the economy have varied so widely. The OECD has forecast the UK’s economy could be 3 per cent smaller by 2022 after a no deal. The Bank of England thinks it could be as much as 6 per cent in a ‘disorderly’ Brexit. That would be catastrophic, though still far smaller than the 12 per cent hit to the economy in the two years following the financial crisis.

Given all this uncertainty, the natural reaction for economic policy makers might be to throw up their hands in defeat and decide to work out how best to support the economy if and when a no deal exit happens. But any delay risks making the impact of no deal worse.

So can the Treasury and the Bank of England prepare, even though no one knows how big the hit will be? Yes, is the unequivocal answer in new Resolution Foundation research.

You can continue reading the blog post or go straight to the PDF of the 35-page briefing

Dealing with no deal
Understanding the policy implications of leaving the EU without a formal agreement Richard Hughes, Jack Leslie, Cara Pacitti & James Smith (September 2019)

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