Date
29 May 2017
Britain's economy is clouded by the adverse impact of Brexit which could wipe up to 2.5 percent off GDP growth, according to the EU. Photo: The Telegraph
Britain's economy is clouded by the adverse impact of Brexit which could wipe up to 2.5 percent off GDP growth, according to the EU. Photo: The Telegraph

Britain faces recession in wake of Brexit, EU warns

Britain could spiral into a recession next year after it voted to leave the European Union.

Gross domestic product could take a 1 percent to 2.5 percent hit in cumulative adverse effects, Reuters reports, citing EU economic commissioner Pierre Moscovici.

EU estimates released on Tuesday give more precise figures than those provided by Moscovici and add a breakdown for this year and next.

Britain faces a “substantial slowdown” which will limit its economic growth to between 1.3 and 1.6 percent this year, lower than earlier estimates of a 1.8 percent growth.

The European Commission’s simulations project a much worse situation for next year, when Britain could experience a 0.3 percent contraction in the worst scenario.

In the most optimistic scenario, Britain’s gross domestic product would grow 1.1 percent in 2017, still much less than the previously forecast 1.9 percent rise.

The 23 June Brexit referendum “will affect not only the UK but also the rest of the EU economy through several transmission channels, mainly uncertainty, investment, trade and migration,” the commission said.

It estimated that GDP growth in the euro area would moderate marginally in 2016 to 1.5-1.6 percent and to slow further in 2017 to between 1.3 and 1.5 percent.

In the commission’s latest economic forecasts released in May, the 19-country currency area was expected to grow 1.6 percent this year and 1.8 percent in 2017.

It said the assessment of the Brexit economic impact could change since the referendum had created an extraordinarily uncertain situation.

However, it said “leave” vote had “generally increased risks to the outlook, particularly on the downside”.

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