Firm should prepare
No Deal Brexit could trigger four quarter recession
A Brexit deal could see the UK perform better than expected
A disorderly exit from the European Union on the 31 October could prompt a four quarter recession with GDP contracting by 1.5% next year, according to new research.
However, a Brexit deal which finally resolves some of the uncertainties about the UK’s future trading relationship with the EU, could lead the UK economic to perform better in 2020 than previously expected.
According to the research from KPMG, a deal could prompt an appreciation of the pound by as much as 15% and enable businesses to recommence their investment plans.
With a strong labour market providing support for further consumer spending, the UK economy has the potential to then perform more strongly in 2020, even though a Brexit deal is unlikely to resolve all the outstanding questions about the UK’s ongoing relationship with the EU.
Catherine Burnet, senior partner at KPMG in Scotland, said: “Our latest report is already identifying weaknesses in important sectors for the Scottish economy, including manufacturing, and services. In other areas, including retail, the downward trend has slowed, but the long term outlook remains concerning.
“It reaffirms the need for Scotland’s businesses to plan now, if they haven’t already developed a strategy.
“The threat of a no-deal Brexit has becoming increasingly real, as has the possibility of domestic political and policy change.”
Yael Selfin, chief economist at KPMG UK, added: “The UK economy now has the potential to strengthen over the next 12 months. But a no-deal Brexit could put paid to this upside, triggering the UK’s first recession for a decade.”
Speaking at the Annual Scottish Business Address in Glasgow, Tim Allan, Scottish Chambers of Commerce president, said: “Companies in Scotland are facing a barrage of challenges. The Brexit bite, rising business costs and recruitment difficulties are having real-life implications on investment decisions.
“The burden of costs on the shoulders of business is taking its toll. Business and Government together, need to urgently address the quietly growing perception that doing business in Scotland is less competitive than other parts of the UK.
“If re-balanced, we will elevate our global position as a pro-enterprise and pro-entrepreneurship nation.”
(Monday Noon update): Johnson to meet Juncker on Monday