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Brexit a threat to economy, warns Danske Bank

By John Mulgrew

Published 07/01/2016

Exiting the EU is the
Exiting the EU is the "main risk" the UK economy faces, a new report has claimed

Exiting the EU is the "main risk" the UK economy faces, a new report has claimed. A Brexit could have a serious impact on the UK, and "higher uncertainty until the referendum may hurt the recovery", according to a report by Danske Bank.

But the research said the bank still "expects growth slightly above trend in coming years, driven mainly by domestic demand, as the strong pound and weak global demand weigh on exports".

But on the prospect of the UK leaving the EU, it added: "The upcoming referendum raises the issue that firms may be reluctant to invest. The possibility of a vote to leave the EU means that the future economic environment for British firms is uncertain".

"We expect investments to continue growing at a solid pace as more private firms are close to their capacity limits and labour has become increasingly expensive. The downside risks to our forecast are the fiscal consolidation plans and the upcoming EU in/out referendum.

"The fiscal consolidation plans may weigh on total investments through lower government investments.

Danske Bank also predicted the UK would not see a rise in interest rates until May this year.

"The lower oil price has lowered the inflation outlook," it added. "This is the main reason we recently moved our call for the first Bank of England hike to Q2, 2016, probably in May."

Danske Bank further predicted steady growth in GDP of 2.4% this year, before falling slightly to 2.3% in 2017.

And it said it expects the "EU and UK will strike a deal good enough for the UK to vote for remaining" in the EU as part of the free market, although the UK is seeking support on limiting access to benefits for EU migrants.

Belfast Telegraph

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