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8 October 2019

No-deal Brexit likely to push UK budget deficit to 100 billion pounds - IFS

Britain's budget deficit is likely to more than double to around 100 billion pounds if the country leaves the EU without a deal, quickly requiring a return to austerity, a leading think-tank said on Tuesday.

Britain is due to leave the EU on Oct. 31 and Prime Minister Boris Johnson has said he is determined to do so despite parliament ordering him to seek a delay if he cannot negotiate an acceptable transition agreement before then.

The Institute for Fiscal Studies predicted borrowing would rise to 92 billion pounds - equivalent to 4% of national income - by 2021/22 under a "relatively benign" no-deal Brexit scenario, in which there are no major delays at borders.

Even then, the economy would still enter recession in 2020, the IFS said in an annual assessment of the public finances.

If the government undertook enough fiscal stimulus to stop the economy contracting - roughly 23 billion pounds of extra spending in 2020 and 2021 - annual borrowing would peak at 102 billion pounds

"A no-deal Brexit would likely require a fiscal short-term stimulus followed by a swift return to austerity," IFS deputy director Carl Emmerson said.

In the longer term, a no-deal Brexit would mean less money to spend on public services - or higher tax rates - than staying in the EU or leaving with a deal, the IFS said.

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