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article imageNo deal Brexit could trigger U.K. recession

By Tim Sandle     Oct 5, 2018 in Business
London - A no deal Brexit for the U.K. could lead to a recession, according to a leading banker. This presents a key issue as uncertainty hovers over the British government's strategy.
The U.K. government plans for Brexit, the so called Chequers Plan (named after the Prime Minister's official residence where the deal was put together with near universal cabinet support). This plan involves the U.K. leaving the European Union but still being bound by a series if regulations and final arbitration by the European Courts, in exchange for more preferable market access.
Given the current timings, should this deal fail to be agreed by European negotiators and then by the UK parliament (both phases are fraught with difficulty and uncertainty), the only alternative us a "hard Brexit" where there us no deal, leaving the U.K. subject to the rules of the World Trade Organization and scrambling to seek trade deals with other countries.
This latter scenario would drive the UK into an economic recession, according to Ross McEwan, who is the chief executive of the Royal Bank of Scotland.
This is based on a prediction of UK economic growth slipping from around 1.5 percent to zero or even a negative figure. The sectors of the economy that the banker is most concerned about are retail and construction companies. He notes that firms in these business streams are taking a cautious approach. Taking retail, in 2018 a number of high street chains have closed across British towns and cities.
This situation has also led the in the Royal Bank of Scotland showing a reluctance to invest in these sectors. As McEwan told the BBC: "Big businesses are pausing, they are saying that in six months time I'll have another look at the UK and I might come back, but if it's really bad I'll invest elsewhere - that's the reality of where we are today."
The new warning us marched by similar concerns from Japanese car maker Nissan, which has a major plant in North East England. Nissan are also speculating reduced growth in the U.K. should a hard Brexit arise. In a statement provided to the Guardian authorized by the main board in Japan, Nissan said: "As a sudden change from those rules to the rules of the World Trading Organization will have serious implications for British industry, we urge UK and EU negotiators to work collaboratively towards an orderly balanced Brexit that will continue to encourage mutually beneficial trade."
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