Brexit trade deal absence would cut 2% off UK’s output: BOR

Failure of securing a free trade deal between the U.K. and the European Union would cost the U.K. a 2% economic output slash while driving up inflation, unemployment, and public borrowing, the Office for the Budget Responsibility warned on Wednesday.

The OBR reiterated its previous forecasts after deciding the prospect of a “No trade deal Brexit” remained a risk, with just a month left before Britain completely leaves the bloc on Dec. 31. Moreover, the OBR said the tariff imposition and border disruption would hit parts of the economy including manufacturing, the booming sector amidst the COVID-19 crisis.

Aside from the initial 2% reduction in economic output, Britain may also face a swollen unemployment record of up to 8.3% in the third quarter of 2021 from a 4.8% rate in the same quarter of 2020 – once Britain leaves the EU without a trade deal.

More so, the OBR also predicted a 1.5% increase in consumer prices while lower tax receipts and higher spending on welfare and other measures could result in higher borrowing – 10 billion pounds a year on average from 2021-22 onwards, increasing debt.