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Post-Brexit recession ‘almost inevitable’ says think tank


The stockpiling of imports by UK companies ahead of Brexit will help boost the UK’s gross domestic product (GDP) by 0.5% this year, but this will be followed by a similar drop in GDP in 2019, according to new analysis.

Think tank the Centre for Economics and Business Research (CEBR) said companies would stockpile imports worth around £38 billion, or 2% of UK GDP. This stockpiling would protect against the likely impact of a ‘no-deal’ Brexit that could create difficulties in sourcing products such as pharmaceuticals, food and raw materials.

CEBR founder Douglas McWilliams said the stockpiling itself would not add to GDP, but associated production and processing would add around £10bn to GDP.

As a result, the CEBR is predicting a 0.5% hike in GDP above the underlying trend in the three quarters from July 2018 to March 2019, but that GDP would be reduced by an equivalent amount for the rest of 2019.

“This makes a post Brexit mini recession almost inevitable,” McWilliams said in a briefing note.

Commercial law expert Clare Francis of Pinsent Masons, the law firm behind Out-Law.com, said the research “demonstrates further the importance for businesses to start Brexit planning in earnest”.

“Given the negotiating timetable, businesses waiting for certainty will be acting too late and critical supplies will be hard to come by. This is particularly true if other businesses have started stock-piling products which may lead to product shortages and supply issues,” Francis said.

“Businesses need to plan strategically to identify where they will need critical products from their supply chain in order to mitigate supply chain vulnerability. In addition businesses should aim to identify where they may see short term demand surges so that they can respond to the market changes and respond to the needs to make the most of the opportunities that this short term demand presents whilst still having a long term plan in sight to underpin future trading,” Francis said.

The CEBR analysis is the latest in a string of reports analysing the potential impact of a scenario where the UK leaves the EU at the end of March 2019 without signing a withdrawal agreement.

Last week academic think tank The UK in a Changing Europe also concluded that stockpiling by businesses and consumers could lead to a temporary uplift in demand and be positive for GDP, in the longer term there would be a negative impact from a fall in sterling and rising inflation.

The UK government recently published 25 technical notices highlighting the practical effects of a no-deal Brexit, with further notices expected in the coming weeks.

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