United Kingdom debt to increase to record level if no-deal Brexit

United Kingdom debt to increase to record level if no-deal Brexit

United Kingdom debt to increase to record level if no-deal Brexit

The Institute for Fiscal Studies (IFS) Deputy Director Carl Emmerson, warned in his latest report released on Tuesday, a no-deal Brexit will send public debt rocketing to levels not seen for almost 50 years, as cited by Reuters.

"The government is now adrift without any effective fiscal anchor", said IFS director Paul Johnson.

Debt is projected to rise substantially in that scenario, climbing to nearly 90%of annual economic output for the first time since the mid-1960s, as the government borrows more to increase spending and kickstart economic growth.

The Institute for Fiscal Studies (IFS) said following last month's spending review, Government borrowing was on course to top £50 billion next year, more than double what the Office for Budget Responsibility was forecasting as recently as March.

As the government would look to encourage growth after a no-deal Brexit, the IFS predicts a quick-fire spending spree which would help push up debt to 90 per cent of national income, a ten per cent increase on current levels.

A rise in public spending would not stop the economy entering recession in 2020, however, the IFS warned.

It found that a no-deal Brexit will hit the United Kingdom economy the hardest and drag down growth.

It will continue to closely monitor the effects of the temporary tariff regime on the United Kingdom economy and has announced an exceptional review process will be used to make changes to the temporary tariff regime if necessary after exit day.

The most likely scenario now is that Brexit is delayed yet again, an outcome that Britain's parliament has sought to ensure by passing a law requiring Johnson to seek an extension if he can't get a deal with European Union officials.

It also said that a "no-deal Brexit would be economically considerably worse, even under a relatively benign scenario".

Prime minister Boris Johnson has also emphasised the importance of government spending programmes being temporary, should the economy not perform as well as expected.

A continued delay to Brexit would mean continued uncertainty and very poor growth of only around one per cent a year.

He said that in the event of no-deal, any measures to support the economy would have to be strictly temporary.

Whether - and if so how and when - the United Kingdom leaves the European Union will be perhaps the key determinant of growth over the next few years. Widespread nationalisations, handing 10% of share capital of large companies to employees while redirecting some dividends to the Treasury, or other policies that might reduce private sector investment significantly, would challenge the UK's traditional "business model" and risk damaging growth by an amount it is not possible to quantify.

"But with the chances of us leaving in less than four weeks without a deal increasing by the day, the Prime Minister has missed a real opportunity to back British farmers".

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