No-deal Brexit forecast to spark year-long UK recession

State borrowing forecasted to balloon by about £30 billion per year from 2020

LONDON: Britain will slide into a year-long recession should it leave the European Union without a deal with Brussels, the government's official forecaster said Thursday.

"The UK enters a year-long recession in the fourth quarter of 2019" should Britain depart the bloc on October 31 with a "no-deal, no-transition Brexit", the Office for Budget Responsibility (OBR) predicted in a key report.

State borrowing was meanwhile forecast to balloon by about £30 billion ($37 billion, €33 billion) per year from 2020 on sliding tax receipts, should Britain default to World Trade Organisation (WTO) tariffs as would happen if there is no new trading arrangements in place with the EU.

Boris Johnson, the front-runner to next week become Britain's prime minister, has repeatedly vowed that the country will leave without an agreement if no deal is reached by the end of October.

The OBR's fiscal risks report highlighted the impact on the public finances of a no-deal, no-transition departure.

"Heightened uncertainty and declining confidence deter investment, while higher trade barriers with the EU weigh on exports. Together, these push the economy into recession, with asset prices and the pound falling sharply," the OBR said.

The Bank of England has repeatedly warned that a no-deal Brexit would spark a deep recession, while the International Monetary Fund says the UK economy would suffer "substantial costs" as a result.

The British pound, which this week hit its lowest point for more than two years against the dollar and six months against the euro owing to Brexit deadlock, held firm in Thursday deals.