UK economy 'may have already entered recession'

23 Jul 2019

There is a one-in-four chance that the UK economy has already 'stalled and entered recession', according to research carried out by the National Institute of Economic and Social Research (NIESR).

The NIESR blames the uncertainty around Brexit for the UK's 'stagnating' economy, adding that the outlook beyond the country's scheduled departure from the EU in October is 'very murky indeed'.

The think tank says that on the assumption that a no-deal Brexit is avoided, the economy is forecast to grow at around 1% in 2019 and 2020. However, the outlook worsens if an orderly no-deal Brexit occurs. In this situation, the economy is forecast to stagnate, and inflation is likely to accelerate to 4.1%. In the case of a disorderly no-deal Brexit, the UK is likely to suffer a 'severe downturn', predicts the NIESR.

Commenting on the research, Professor Jagjit Chadha, Director at the NIESR, said: 'However we look at it, there will not be much economic joy in a no-deal Brexit.'

If the UK leaves the EU with a deal, the NIESR expects economic conditions to continue 'roughly as they are', with high levels of employment and capacity utilisation.

However, growth would continue to be sluggish as businesses refrain from investment in view of 'continuing high uncertainty about future trading relations'.

Additionally, the NIESR expects public sector borrowing to rise above 2% of GDP, as some loosening of the public purse appears 'inevitable'.