Wednesday, July 24, 2019

Macroeconomic Consequences of a No-Deal Brexit

Dr Jagjit Chadha (@jagjit_chadha), Director of the UK NIESR [National Institute of Economic and Social Research] @NIESRorg presents results of modeling the '#NoDeal #Brexit' scenario's impact on the British Economy. 

Immediately on impact, the model results project a 2-3% *contraction* in economic activity (GDP) and upon subsequent recovery, over the longer-term, the model projects a nearly 7% lower GDP below the #SoftBrexit scenario (which nearly approximates a Business as Usual / BAU) scenario that the model takes as the baseline). 

The contraction (of the 2-3% magnitude) is assumed to occur in the event that not only is no EU-UK deal reached, but the UK carries out no monetary/fiscal or other policy adjustments in anticipation. It thus represents a rather extreme scenario that, within the assumptions of the model is not likely to (fully) come to pass. Yet the discussion is important, so that even the worst consequences of a No Deal Brexit come to be more widely appreciated.