No deal Brexit could sink UK economy warns Bank of England
THE Bank of England has warned that the pound would crash, inflation soar and growth plummet in the event of a no deal disorderly Brexit.
The apocalyptic outcome, contained in the Bank's analysis of various EU withdrawal scenarios, would also see unemployment skyrocket.
In the event of a disorderly no deal, no transition Brexit, Britain's GDP could fall by 8 per cent, according to a worst case scenario analysis by the Bank.
The unemployment rate would rise 7.5 per cent, inflation would surge to 6.5 per cent, while interest rates would rise as high as 5.5 per cent.
House prices are forecast to decline 30 per cent, while commercial property prices are set to fall 48 per cent. The pound would fall by 25 per cent to less than parity against both the US dollar and the euro, according to the bombshell report.
Prime Minister Theresa May is aiming to convince sceptical MPs to back her EU withdrawal agreement she reached with Brussels. Parliament is set to vote on the deal on December 11 and if the deal is not approved it will see the UK lose the transition period.
The Bank's doomsday analysis was published just hours after the Government released its own impact assessment, which found that withdrawal from the EU under Theresa May's plans could cut the UK's GDP by up to 3.9 per cent over the next 15 years.
But leaving without a deal could deliver a 9.3 per cent hit to GDP over the same period, said the analysis produced by departments across Whitehall. And the UK will be poorer in economic terms under any version of Brexit, compared with staying in the EU.
The Bank of England added that in the event of a disruptive Brexit, where there is no change to border trade or financial markets, GDP may fall 3 per cent from its level in the first quarter in 2019.
In this scenario, the unemployment rate will hit 5.75 per cent and inflation rises to 4.25 per cent.
House prices decline 14 per cent and commercial property prices fall 27 per cent. The pound would fall by 15 per cent against the US dollar to 1.10.
However, major British banks have "levels of capital and liquidity to withstand even a severe economic shock that could be associated with a disorderly Brexit", the Bank concluded from tests of banks' financial resilience.
The UK's banking system is "strong enough to continue to serve UK households and businesses even in the event of a disorderly Brexit", the Bank said.