{"id":4871,"date":"2018-11-28T17:37:01","date_gmt":"2018-11-28T17:37:01","guid":{"rendered":"http:\/\/www.styledeals.co.uk\/blog\/bank-warns-no-deal-could-see-uk-sink-into-recession\/"},"modified":"2018-11-28T17:37:01","modified_gmt":"2018-11-28T17:37:01","slug":"bank-warns-no-deal-could-see-uk-sink-into-recession","status":"publish","type":"post","link":"https:\/\/www.styledeals.co.uk\/blog\/bank-warns-no-deal-could-see-uk-sink-into-recession\/","title":{"rendered":"Bank warns no-deal could see UK sink into recession"},"content":{"rendered":"\n<div property=\"articleBody\">\n<figure class=\"media-landscape has-caption full-width lead\"><span class=\"image-and-copyright-container\"><\/p>\n<p>                <img loading=\"lazy\" decoding=\"async\" class=\"js-image-replace\" alt=\"Bank of England governor Mark Carney\" src=\"https:\/\/ichef.bbci.co.uk\/news\/320\/cpsprodpb\/14B6A\/production\/_104524848_mark-carney1.jpg\" width=\"976\" height=\"549\"\/><span class=\"off-screen\">Image copyright<\/span><br \/>\n                 <span class=\"story-image-copyright\">AFP<\/span><\/p>\n<p>            <\/span><figcaption class=\"media-caption\"><span class=\"off-screen\">Image caption<\/span><br \/>\n                <span class=\"media-caption__text\"><br \/>\n                    Mark Carney has previously said stress tests would ensure banks could survive a &#8216;disorderly Brexit&#8217;<br \/>\n                <\/span><br \/>\n            <\/figcaption><\/figure>\n<p class=\"story-body__introduction\">A no deal Brexit would send the pound plunging and trigger a worse recession than the financial crisis, the Bank of England has warned.<\/p>\n<p>It said the UK economy could shrink by 8% in the immediate aftermath if there was no transition period, while house prices could fall by almost a third.<\/p>\n<p>The Bank of England also warned the pound could fall by a quarter. <\/p>\n<p>The Bank&#8217;s analysis comes after <a href=\"https:\/\/www.bbc.co.uk\/news\/uk-politics-46366162\" class=\"story-body__link\">the Treasury said the UK would be worse off<\/a> under any form of Brexit.<\/p>\n<p>This Bank&#8217;s scenario is not what it expects to happen, but represents a worst-case scenario, based on a so called &#8220;disorderly Brexit&#8221;.<\/p>\n<p>The scenario looks at the five-year period after the UK leaves the EU.<\/p>\n<p>But by the end of 2023, the economy is expected to resume growing.<\/p>\n<ul class=\"story-body__unordered-list\">\n<li class=\"story-body__list-item\"><a href=\"http:\/\/www.bbc.co.uk\/news\/business-46377763\" class=\"story-body__link\">What did we learn from the Bank of England?<\/a><\/li>\n<li class=\"story-body__list-item\"><a href=\"http:\/\/www.bbc.co.uk\/news\/uk-politics-46366162\" class=\"story-body__link\">Brexit will make UK worse off, government warns<\/a><\/li>\n<\/ul>\n<p>&#8220;These are scenarios not forecasts. They illustrate what could happen not necessarily what is most likely to happen.<\/p>\n<p>&#8220;Taken together the scenarios highlight that the impact of Brexit will depend on the direction, magnitude and speed of the effect of reduced openness of the UK economy,&#8221; Bank of England governor Mark Carney said.<\/p>\n<h2 class=\"story-body__crosshead\">What is a &#8216;disorderly Brexit&#8217;?<\/h2>\n<p>The Bank of England has made a number of assumptions &#8211; not forecasts &#8211; about what would cause a disorderly Brexit.<\/p>\n<ul class=\"story-body__unordered-list\">\n<li class=\"story-body__list-item\">The UK reverts to World Trade Organization rules<\/li>\n<li class=\"story-body__list-item\">No new trade deals are implicated by 2022<\/li>\n<li class=\"story-body__list-item\">The UK loses all access to existing trade agreements between the EU and third country&#8217;s<\/li>\n<li class=\"story-body__list-item\">Severe disruption at borders because of customs checks<\/li>\n<li class=\"story-body__list-item\">Migration reverses from 150,000 to falling by 100,000<\/li>\n<\/ul>\n<p>The Bank of England does not give a probability of this happening.<\/p>\n<h2 class=\"story-body__crosshead\">What happens during this disorderly scenario?<\/h2>\n<figure class=\"media-with-caption\">\n<div class=\"player-with-placeholder\">\n            <img decoding=\"async\" class=\"media-placeholder player-with-placeholder__image narrative-video-placeholder\" src=\"https:\/\/ichef.bbci.co.uk\/images\/ic\/720x405\/p06t34l6.jpg\"\/><\/p>\n<p>Media playback is unsupported on your device<\/p>\n<\/p><\/div><figcaption class=\"media-with-caption__caption\"><span class=\"off-screen\">Media caption<\/span>Carney warns of lower pound and higher inflation on no-deal<\/figcaption><\/figure>\n<p>Scenarios drawn up the Bank of England show that GDP would fall by 8% in 2019 against its current forecast.<\/p>\n<p>Growth would quickly resume and the economy would expand again by the end of 2023 but be smaller than where it was before.<\/p>\n<p>Unemployment would rise to 7.5%, house prices fall by 30% and commercial property prices collapse by 48%.<\/p>\n<p>Interest rates would reach 4%.<\/p>\n<h2 class=\"story-body__crosshead\">What other scenarios did the Bank of England consider?<\/h2>\n<p>The Bank looked at three other scenarios.<\/p>\n<p>It looks a &#8220;disruptive&#8221; Brexit &#8211; one where the UK retained access to some trade agreements.<\/p>\n<p>It also looked at what might happen if trading arrangements were agreed to give the UK a &#8220;close&#8221; relationship or what it describes as a &#8220;less close&#8221; relationship.<\/p>\n<p>A close relationship is one with no customs checks, no regulatory barriers and a partial deal agreed on financial services.<\/p>\n<p>A less close relationship is one where customs checks start after 2021 and other regulatory checks put in place.<\/p>\n<h2 class=\"story-body__crosshead\">What happens in these scenarios?<\/h2>\n<p>If Brexit is disruptive rather than disorderly,  GDP falls 3% over the five years to 2022, house prices slide 14%, and unemployment reaches 5.75%<\/p>\n<p>If a close trading relationship is agreed, the economy could still be 1% smaller than if the UK had remained in the EU but 1.5% higher than the bank&#8217;s most recent estimate.<\/p>\n<p>If it is less close, the economy&#8217;s growth could be 3.75% less than if the UK had remained in the EU and 0.75% than forecast over the last inflation report.<\/p>\n<p>These figures cover the period to 2023.<\/p>\n<h2 class=\"story-body__crosshead\">Why is the Bank publishing these figures?<\/h2>\n<p>The disruptive and disorderly Brexit scenarios are contained in its half-yearly review of financial stability.<\/p>\n<p>The close and less close scenarios are being published after request by the Treasury Committee of MPs for the impact of Brexit on the Bank&#8217;s ability to conduct its remit to maintain financial stability and contain inflation at 2%.<\/p>\n<h2 class=\"story-body__crosshead\">What does it mean for the banking sector?<\/h2>\n<p>The Bank of England has exposed seven major lenders to a stress test which it said was two and half times more severe than the Brexit scenarios.<\/p>\n<p>All seven lenders- Royal Bank of Scotland, HSBC, Barclays, Lloyds, Standard Chartered, Santander and Nationwide Building Society &#8211; passed the test.<\/p>\n<p>The Bank said: &#8220;The UK banking system is strong enough to continue to serve UK households and businesses in the event of a disorderly Brexit.&#8221;<\/p>\n<\/p><\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.bbc.co.uk\/news\/business-46377309\">Source<\/a> by <a href=\"\">[author_name]<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Image copyright AFP Image caption Mark Carney has previously said stress tests would ensure banks could survive a &#8216;disorderly Brexit&#8217; A no deal Brexit would send the pound plunging and trigger a worse recession than the financial crisis, the Bank of England has warned. It said the UK economy could shrink by 8% in the &hellip; <\/p>\n","protected":false},"author":0,"featured_media":4872,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4871","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"_links":{"self":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts\/4871","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=4871"}],"version-history":[{"count":0,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/posts\/4871\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/media\/4872"}],"wp:attachment":[{"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=4871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=4871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.styledeals.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=4871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}