The Bank of England is warning that a ‘no deal’ Brexit could push the UK towards its biggest economic crash in living memory.

The British bank’s analysis warns that if the UK crashes out of the EU without a deal, its economy could shrink by nearly 8% - more than it did during the financial crisis.

The bank produced the 88 page document on foot of a request from the House of Commons Treasury Committee.

It warns that a ‘no deal’ scenario could see house prices falling by as much 30% - with unemployment doubling and inflation spiralling up to 6%.

The analysis suggests the Pound Sterling could fall by a quarter in value – leaving it on a par with the US Dollar.

It said the scenario could also see migration reversing from a surplus of 150,000 a year to a deficit of 100,000 a year – with knock-on impacts for industry.

“Scenarios not forecasts”

The bank was at pains to point out that the report includes “scenarios not forecasts” noting that they “illustrate what could happen not necessarily what is most likely to happen.”

It said it had made “key assumptions” about the form of the future relationship between the UK and EU, the preparedness of UK business and the effect of future policies in order to compile the analysis.

The report also includes more optimistic forecasts – which are based on the prospect of an accepted Brexit deal complete with a transition agreement.

Further scenarios

The report outlines the bank’s predictions for a “disruptive” Brexit and if trading arrangements allowed for “close” or “less close” ties with the EU.

The bank predicted that under a “disruptive” Brexit – which would see the UK retaining access to certain trade agreements – British GDP would fall by 3% over five years to 2022. It said the scenario could see UK house prices dropping by 14% and unemployment rising by 5.75%.

If a “close” relationship with the EU can be maintained – with alignment on customs, regulations and financial services – the UKs economic growth would be 1% less than if it had simply remained in the EU.   

If a “less close” relationship is agreed – with new customs and regulatory checks introduced by 2021 – UK economic growth could be 3.75% less than if it had remained.

All the predictions cover a five year period.

The report comes as cross-departmental UK Government report warned that a ‘no deal’ Brexit could see the UK economy growing by 9.3% less over 15 years than it would have without Brexit.

The UK Parliament is due to vote on the Brexit Withdrawal Agreement on December 11th.

Additional reporting from IRN