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UK hit with recession warning as Brexit battle builds in parliament

Credit: Reuters Studio
Published on July 18, 2019 - Duration: 01:51s

UK hit with recession warning as Brexit battle builds in parliament

Britain might be entering a full-blown recession that a no-deal exit from the European Union would compound, blowing a £30 billion hole in the public finances, a budget watchdog said on Thursday.

As Francis Maguire reports, a Thursday vote in Parliament could make it harder for the next Prime Minister to go for no-deal.

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UK hit with recession warning as Brexit battle builds in parliament

(SOUNDBITE) (English) HOUSE SPEAKER, JOHN BERCOW, SAYING: 'The ayes have it, unlock!'

UK lawmakers voted on Thursday (July 18) to make it harder for the next Prime Minister to go for a so-called 'no-deal' Brexit.

Both candidates for the top job, Jeremy Hunt and frontrunner Boris Johnson, have threatened to leave the EU on October 31st without an agreement.

If Britain does, it compounds the risk of it going into a full-blown recession, according to the UK's budget watchdog.

The Office for Budget Responsibilty warned the economy could contract 2% by the end of 2020 in a No Deal - A scenario which could also add 30 billion pounds, or $37.4 billion a YEAR to public borrowing by the 2020/21 financial year.

That would DOUBLE the expected deficit.

Speaking at the G7 meeting in France, Britain's Finance Minister warned a recession could be much worse than OBR forecasts.

(SOUNDBITE) (English) UNITED KINGDOM'S CHANCELLOR OF THE EXCHEQUER PHILIP HAMMOND SAYING: "And the OBR is clear that in that a less benign version of no-deal, the hit would be much greater, the impact would be much harder, the recession would be bigger.

So I greatly fear the impact on our economy and our public finances of the kind of no-deal Brexit that is realistically being discussed now." The OBR said the economy probably flat-lined - and may have contracted - in the second quarter.

It warned June's data was - quote - 'particularly weak', adding the pace of growth was likely to stay that way.

There was one green shoot for Britain, though.

Retail sales jumped unexpectedly in June - up 3.8% on the year before - Driven by sales of antiques and second-hand clothes.

And raising some hope a downturn in Q2 could be softer than feared.

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