Economists warn Brexit is going to be either 'bad or awful' for UK prospects in 2021
Leading economists have warned Brexit will be either 'bad or awful' for UK prospects in 2021 with damage apt to be inflicted even if Britain manages to avoid a disorderly Brexit.
The UK can expect no more than 1.5 percent economic growth within the next year in the best case scenario, according to an economic Times survey.
Nina Skero, head of macroeconomics at the Centre for Economics and Business Research, said that whatever its long-term effects, “in 2021, Brexit will be either bad or awful for the UK economy”.
A majority of respondents asserted despite continued wage growth, lower inflation along with a modest easing of austerity, consumers would feel no best by the end of 2021, with anxiety setting in over Brexit's potential impact on jobs, house prices and equity markets.
Even the number of economists who believe Brexit will eventually benefit the economy were cautious about short term outlook.
Braced for a hard landing
Gerard Lyons, chief economic strategist at Netwealth, said the economy “could easily come to a standstill in the early months” of 2021.
A insufficient clarity means businesses will likely prepare for the worst, meaning the UK should “brace itself for any hard landing,” based on Rebecca Harding, a trade economist who runs Coriolis Technologies.
Respondents reported evidence of a slide in business investment as firms wait to determine exactly what the outcome will be.
Rain Newton-Smith, chief economist in the CBI, told the FT that companies were putting contingency plans in place, and “more of these plans would become reality, with jobs and investment in the united kingdom lost”.
Best case scenario
In the best case scenario of a relatively smooth Brexit, growth could get later around and going in to 2021.
However, Brexit “brinkmanship” will probably do lasting damage to the economy, with businesses being told to prepare for any no deal making “irreversible” decisions which will be felt within the long-term.
Even if your disorderly Brexit was averted, uncertainty within the UK's future trading relations will limit the opportunity of a rebound, with the UK unlikely revisit pre-referendum levels of growth or to perform as well as its main trading partners.
Business and consumers cautious
Businesses have adopted a cautious method of the economic environment that is unlikely to abate in the near future.
Mark Gregory, chief economist at EY, said: “Even when we sign a withdrawal agreement, I don't think this will unleash a spree of economic investment. The united kingdom is going to be approached generally on a 'care and maintenance' basis by multinationals.”
But worryingly, that has impacted consumer confidence and consumers' willingness to invest.
David Miles, professor at Imperial College, said a modest development in real wages wouldn't be noticeable to most households.
Brexit effects means “they will feel worse off, even if there is more money within the bank”.