According to the Bank of England the no-Brexit deal would have major severe impact on the British economy and financial markets. The Central Bank published its scenarios, not forcasts in London today. The scenarios illustrate what could happen, but not necessarily what is most likely to happen.
The bank have made different scenarios related to the Brexit-decision and according to the study in the situation with no-Brexit deal (with many severe delays at the UK boarders and loss of confidence in the financial markets) it would mean that the British economy would be hit like the oil shock in the 1970´s.
The gross domestic product would decline by 8 percent and unemployment would rise to 7,5 percent. House prises would decrease by 30 percent and the commercial property prises would sink by 48 percent. Inflation could be 6 percent. Sterling could loose 25 percent of its value and for example the UK Goverment Bond yield could rise by 100 bps.
The most reliance industry sectors on EU trade would be oil & gas, chemicals & pharma, finance and cars/transportation.
On the other hand, the Bank of England also published its financial stability report on the same day and according to the central bank “the UK banking system is strong enough to continue to serve the UK households and businesses even in the event of a disorderly Brexit.”
BoE wrote that since the financial crisis, major UK banks have substantially reduced their reliance on wholesale funding.
– At group level, they hold more than £1 trillion of high-quality liquid assets. They are able to withstand more than three months of stress in wholesale funding markets.
As a result of supervisory actions and their own prudent risk management, major banks have aligned the currency of their liquid assets to that of their maturing wholesale funding. They can now withstand many months without access to foreign exchange markets, the study finds.
– In addition, banks have pre-positioned collateral at the Bank of England that would allow them to borrow a further 300 billion. The Bank is able to lend in all major currencies. The Bank, other UK authorities and financial companies have engaged in extensive contingency planning, the bank says.
The UK Parliament is having the Brexit-vote on the 11th December.