The UK will crash out of the EU without a trade deal, predicts OECD

Prime Minister Theresa May greets European Council president Donald Tusk in London on 6 April. [European Council]

UK economic growth will slow sharply next year before Britain leaves the EU in 2019 without a trade deal, according to the Organisation for Economic Cooperation and Development.

The influential Paris-based policy group predicts in its latest UK forecast that GDP growth will weaken slightly to 1.6% in 2017 then slow dramatically to 1% in 2018.

The gloomy forecast is driven by the OECD’s assumption that Britain will leave the EU without a trade deal and fall back onto restrictive World Trade Organisation (WTO) tariffs, classified as a “most-favoured nation.”

Economists have warned that a “cliff-edge” Brexit scenario whereby the UK fails to secure a deal would be economically destructive.

EU offers Brexit trade talks, sets tough transition terms

The European Union offered Britain talks this year on a future free trade pact but made clear in negotiating guidelines issued on Friday (31 March) that London must first agree to EU demands on the terms of Brexit.

The OECD said: “This projection assumes that the United Kingdom’s external trade will operate on a ‘most favoured nation’ basis from April 2019.

“The uncertainty, and the assumed outcome, is projected to undermine spending, in particular investment. Policies have supported private confidence and consumption, but household spending is projected to ease as the combination of a weakening labour market and higher inflation reduces real wage growth.”

Many other G7 countries saw their 2018 growth prospects upgraded in the OECD’s latest round of forecasts.

The group now predicts that only Italy from the G7 group of rich countries will perform worse than the UK next year.

UK seeks transitional EU trade deal to avoid Brexit ‘cliff edge’

The United Kingdom may need a transitional agreement to smooth its exit from the European Union but it should not “buy back” into too many of the bloc’s regulations, British trade minister Liam Fox said on Sunday (18 December).

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