A no-deal Brexit will slice almost 3% from the UK economic growth over the next three years compared with just 0.6% from the rest of the EU, according to the latest health check of the global economy by the Organisation for Economic Co-operation and Development. Amid concerns that all developed countries will experience slower growth next year, the Paris-based club for the world’s 35 richest states warned that the UK would take the biggest hit if the government failed to secure an agreement with the EU. OECD analysis estimates that losing unfettered access to EU markets after 31 October will probably plunge the UK into recession next year. The loss of trade, investment and technical knowledge plus a further fall in the pound will prolong Britain’s growth rate until at least 2022. Laurence Boone, the OECD’s chief economist, said an agreement to smooth Britain’s exit was important to protect businesses and the economy. “The best thing is to avoid a no-deal Brexit and to stay closely aligned to the EU as possible,” she said. The OECD said an agreement before the 31 October deadline would limit the fall in the UK’s rate of GDP growth to 0.9% in 2020 from 1%this year, down 0.2 percentage points from its May forecast. But leaving the EU without a deal would lead to a contraction of 1% next year and a further 0.5% hit to growth in 2021 and 2022. Boone said some of the downturn could be offset by extra public spending and a monetary stimulus by the Bank of England but it was difficult to estimate how much effect this would have until they laid out their plans. In comments that will be considered among the gloomiest from the OECD since the 2008 financial crisis, Boone said she was concerned that after two years of heightened uncertainty created by tit-for-tat trade wars and Brexit negotiations, the depressed state of the global economy risked becoming permanent. “The concern is that with high levels of uncertainty going on for so long that we run the risk of low levels of trade and investment becoming entrenched. And that would leave countries even more exposed to a financial shock,” she said. Global investment fell to 1% in the second quarter of the year and world trade dropped from an annual rate of expansion of 6% in 2016 to 0.6% in the second quarter. Boone said the situation was likely to worsen next year if powerful trading countries, including the US and China, continued to expand the number of goods subject to higher import tariffs. Across the 19-member eurozone, growth is expected to drop by 0.1 percentage points to 1.1%. The US will continue to grow at the fastest rate among developed nations and stave off threats of an imminent recession, though GDP growth is expected to fall from 2.4% this year to 2% next year, the OECD said. In May, the OECD said the global economy had stabilised after a difficult year marred by trade wars, volatile financial markets and rising oil prices. But the gloomier picture painted this week by the OECD reveals a global economy set on a downward trend. Boone urged developed countries to open their wallets to bolster infrastructure spending to stave off slowing growth and improve tax incentives for firms to expand and create jobs. She praised the Dutch government for outlining a package of measures this week worth 1% of GDP that included extra cash for affordable housing, funds to support a range of infrastructure projects and plans to replace gas production with renewable energy.
A no-deal OECD would take close to 3% off the UK 's economic growth in 2020 , according to EU ( OECD ). The UK would suffer more than the EU if a deal is not struck, with the bloc losing close to 3% of growth, the group's statistics suggest. Moreover, a lack of access to EU markets would probably force the UK into a recession in the next three years , according to the data, due to a drop in trade and outside investment, as well as reduced technical knowledge and a weakened pound.