LONDON, July 18 (Xinhua) -- A no-deal Brexit will put massive pressure on public finance as government borrowing will be 30 billion pounds higher, Britain's spending watchdog warned on Thursday.
The Office for Budget Responsibility released its fiscal risks report 2019 on Thursday, assessing the fiscal implications resulting from the less severe of the two "no-deal, no-transition" scenarios set out by the International Monetary Fund in its April world economic outlook.
"This scenario is not necessarily the most likely outcome and it is relatively benign compared to some (for example, assuming limited short-term border disruptions). But it still adds around 30 billion pounds a year to borrowing from 2020-21 onward and around 12 percent of GDP to net debt by 2023-24," the report said.
Brexit risks feel more prominent than they did two years ago, with the no-deal option being countenanced at the highest levels, as both remaining candidates for British prime minister explicitly countenancing the possibility of UK leaving the EU without a deal on October 31, said Robert Chote, chairman of Office for Budget Responsibility.
"The big picture is that heightened uncertainty and declining confidence deter investment, and higher trade barriers with the EU weigh on domestic and foreign demand, while the pound and other asset prices fall sharply. These factors combine to push the economy into recession," Chote said, adding that the economy and asset prices then recover somewhat over time.
While Britain may end its EU membership on October 31, the impact of Brexit would continue to unfold for many years beyond the five-year horizon that the report used for fiscal stress test purpose, Chote said.
Britain's departure from the EU has been postponed from the original March 29, 2019 deadline to Oct. 31, more than three years after the British people voted in a referendum to leave the bloc.
Having failed to deliver a Brexit deal through the British Parliament to bring Britain out of the EU, Theresa May resigned as Conservative Party leader on June 7, but will remain as caretaker prime minister until her successor is chosen.
Former Foreign Secretary Boris Johnson and current Foreign Secretary Jeremy Hunt are vying for the Conservative Party leadership with result expected to be announced next week.
