Britain would fall into recession, the pound would collapse and shop prices would rocket in the event of a no-deal Brexit, credit ratings agency Moody’s has warned.
In a grim prediction of what is at stake as the Government scrambles to avert a chaotic EU exit, Moody’s said the probability of a no-deal Brexit has ‘risen materially’.
The warning comes as the Government publishes its next set of technical papers on what could happen if Britain leaves the EU without an exit agreement.
Britain would fall into recession, the pound would collapse and shop prices would rocket in the event of a no-deal Brexit, credit ratings agency Moody’s has warned as Theresa May steps up preparations for crashing out of the EU
Moody’s said today: ‘The immediate impact of a no-deal Brexit would likely be seen first in a sharp fall in the value of the British pound, as was also evident after the 2016 UK-wide referendum on whether to remain in or leave the EU.
‘The fall in the exchange rate would lead to temporarily higher inflation and hence a further squeeze on real wages over the following two to three years, which in turn would weigh on consumer spending and depress growth.’
The report added that unemployment would rise, the Treasury would be knocked by lower tax revenue and the UK could ‘fall into recession very quickly’.
The automotive, airline, aerospace and chemicals sectors would be most severely affected, Moody’s said, as they account for the largest trade flows in goods with the EU.
The impact on the retail sector would be ‘substantial’ as higher World Trade Organisation tariffs take their toll.
‘We still think the UK and the EU will eventually reach an agreement to preserve many – but not all – of their current trading arrangements, particularly around trade in goods,’ said Colin Ellis, Moody’s chief credit officer and co-author of the report.
‘However, we believe the prospect of the UK leaving the EU without any agreement has risen materially.’
The automotive, airline, aerospace and chemicals sectors would be most severely affected, Moody’s said, as they account for the largest trade flows in goods with the EU (file)
The Prime Minister stepped up efforts to brace Britain for no-deal Brexit today with warnings that millions of people could need new driving permits and passports to travel to the EU.
Another tranche of papers on the impact of crashing out of the EU says motorists would need a new £5.50 international licence to use their cars on the continent.
They also warn that if negotiations with Brussels fail ex-pats might be forced to retake driving tests after March next year, as their UK ones will no longer be valid.
Britons with less than six months to run on their passports would also have to renew before travelling to the EU – while traditional British blue passports will start being issued again late in 2019.
The government played down fears that holidaymakers would be hit with swingeing roaming charges for using mobile phone in the EU.
Although regulations that underpin the standardised costs will disappear next March, the biggest telecoms companies have agreed not to impose extra fees.