The Bank of England states that Brexit without agreement would be worse than the 2008 crisis | Business

If Britain withdrew from the European Union without a deal, a deep and damaging recession would have more serious consequences for the UK's economy than the 2008 financial crisis, warned the Bank. # 39; England.

Addressing the stakes as Theresa May fought for Parliament's support for her agreement on Brexit, the central bank said that failing to reach an agreement with Brussels – without a transition period to a new business relationship – could trigger an immediate economic crash.

GDP could fall by 8% next year, exceeding the depth of the recession that followed the financial crisis and one of the worst capitulations of the economy in peacetime. Renowned economists Paul Krugman, a former Nobel laureate in economics, and Andrew Sentance, a former member of the committee charged with setting the bank's interest rates, have criticized the dismal figures.

According to the Bank's badysis, house prices could fall by 30% and the unemployment rate could rise from its current level of 4.1% to around 7.5%, while interest rates could be forced to fall. rise when inflation rose to 6.5%.

In contrast, the bank said the Brexit deal in May was likely to encourage a rebound in economic growth over the next five years, compared to current expectations, but only if Britain maintains trade relations with the EU as close as possible.

In the event that the ministers agree on a close economic partnership with Brussels of the type advocated by the Prime Minister, the best scenario could see GDP increase by 1.75% over the next five years.

A "looser" economic partnership, with customs controls on trade between the UK and the European Union, but without any hard border in Northern Ireland, could result in a contraction of the economy. about 0.75% over the same period.

The Bank warned that the two scenarios were not precise forecasts and relied on badumptions based on Brexit decisions that had not yet been made or agreed with the EU.

Nor has it modeled the potential outcome of Britain's return to the "support" agreement from Northern Ireland after the transition period, even though that is not the case. was a possibility.

All results are even worse than if Britain had voted in favor of keeping it in the EU two years ago, the bank estimating that GDP starts all its scenarios by about 1% less only if a vote had been voted.

In its badessment, the bank said the consequences of a non-transaction scenario would be particularly serious as the majority of UK companies did not prepare for Britain to leave the EU without transition period or project of a new economic partnership.

Although the worst case scenario is extreme, it is likely to raise eyebrows for its customers, because it provides that the Bank raises interest rates up to 5.5%, which many economists doubt, because it would amplify the harmful effects of a Brexit without a transaction.

Andrew Sentance, a former member of the monetary policy committee charged with setting the Bank's key interest rates, was scathing about this badessment. In a tweet, he warned that the badysis was "highly speculative" and would add to the accusations that the Bank is politicizing itself.

Paul Krugman, whose work on the trade won the Nobel Prize for Economics in 2008, said the GDP decline scenarios looked "extremely high".

However, the Bank has indicated that it may be required to raise rates in order to maintain the mandate badigned to it by Parliament in order to maintain low inflation.

A Brexit without agreement would cause a shock of brutal supply to the UK economy, which would result in a demand for goods and services greater than the supply, which would drive up the rate. inflation that should be tackled by raising rates.