Ratings agency Standard & Poor warned in its Countdown to Brexit report that unemployment would rise from 4% to 7.4% by 2020 – the highest level of unemployment seen since the aftermath of the financial crisis.
Failure to secure a deal before March next year would represent a loss of 5.5% of GDP, and a 1.9% loss of GDP in global trade.
“We believe it’s likely that the UK economy would have limited scope to emerge from this moderate recession and regain pre-Brexit output levels over the next three years,” the report said.
It also predicted that house prices would fall by 10% in case of a no-deal Brexit, and household incomes could be £2,700 lower in 2020. Inflation could rise to a record of 5%.
“The risk of a no-deal Brexit on March 30, 2019, while still not our base case, has increased sufficiently to become a relevant rating consideration,” it added.
It said that it expects financial services would immediately lose financial passporting rights into the EU – rather than in 2021 as previously expected – which would incur a loss of 0.4% of GDP per year.
Moreover, UK companies’ contingency plans are unlikely to protect them from market volatility, legal and regulatory uncertainty, border delays, rising input costs and tariffs, and weakening competitiveness and operating performance in many sectors.
The Department for Exiting the EU has previously warned that under a no-deal Brexit there would be no mutual recognition of professional qualifications, and auditing rules would need to be altered.
While UK companies operating solely within the UK would not see any changes in auditing rules, there would be additional requirements to the audits of UK companies operating overseas.
Meanwhile, chancellor Philip Hammond said ahead of his Autumn Budget on Monday that if the UK was to leave the EU without any deal, then there would be a new Budget as “a new approach to the future of the UK economy” would be needed.