A no-deal Brexit would plunge the UK economy into recession and annual growth will slip below 1% this year for this first time since the financial crisis even if a deal is secured, the Organisation for Economic Cooperation and Development (OECD) has warned.
The thinktank, which advises 34 of the world’s richest countries, said that even with a smooth Brexit, the UK economy would slump to 0.8% growth in 2019 from 1.4% in 2018 as Brexit uncertainty and Donald Trump’s trade war with China harmed the UK’s economic prospects. In November it was forecasting 1.4% growth for the UK this year.
The last time annual growth in the UK was below 1% was in the depths of the financial crisis, when the economy contracted by 4.2%.
The OECD said a steep fall in investment over the past year by UK-based firms had left the economy in a weak position to boost its poor productivity rates and increase wages growth.
The economic health check comes as a string of major manufacturing firms have made clear that their future in the UK is in doubt should the government fail to secure a transition arrangement that allows them to trade freely inside a customs union with the EU.
Toyota’s European boss, Johan van Zyl, said he could not promise British employees’ jobs were safe until the outcome of Brexit was decided.
Meanwhile, the BMW board member Peter Schwarzenbauer, who oversees the Mini and Rolls-Royce brands, said the firm might be forced to stop making the Mini at its Cowley plant near Oxford.
The OECD chief economist, Laurence Boone, said the UK had missed out on 0.7% of growth compared with the OECD’s previous projections and 1.7% of growth compared with the US, France and Germany.
“There is no better trade agreement for the UK than the EU single market. Every step back from this arrangement makes it more difficult for the private sector,” she said.