Instant growth downgrade and recession threat as economy hit by Brexit
Economists have started to downgrade their forecasts for UK growth as Britain votes to leave the European Union, with a recession forecast unless a quick deal can be done.
IHS Global Insight said that is "substantially cutting" its GDP growth forecasts to 1.5% from 2% for 2016 and to 0.2% from 2.4% for 2017.
Samuel Tombs, c hief UK economist at Pantheon Macroeconomics, said: "UK voters have opted for Brexit. If fully followed through, this will be an act of economic self-harm with global ramifications. The scintilla of hope is that a revised deal can be negotiated with a panicked EU.
"Unless a swift deal can be done, however, the UK is likely to enter recession. Businesses will hold back from investing, credit costs will rise, and import prices will soar, squeezing households' spending power."
The pound has crashed to its lowest level in over 30 years, plunging 10% against the dollar overnight to 1.33 US dollars, a low not seen since 1985 as the Leave campaign headed for victory.
Howard Archer, chief UK and European economist at IHS, said: "Major economic and political uncertainty will be a fact of life for some considerable time, likely weighing down markedly on business and household confidence and behaviour, so dampening corporate investment, employment and consumer spending.
"Weaker asset markets and tighter credit conditions are seen further hampering UK growth, while the housing market could suffer a marked downturn. Financial sector activity in the City of London may well be hit quickly."
The governor of the Bank of England is to make a statement on Britain's exit from the European Union after Prime Minister David Cameron has delivered his speech, expected within the next few hours.
Economists predict that Mr Carney could move to cut interest rates or expand the Bank's quantitative easing programme.
Jonathan Loynes, chief European economist at Capital Economics, said: "A cut in interest rates and an expansion of the Bank's quantitative easing programme are both possible, as well as co-ordinated action with other central banks to maintain liquidity and smooth currency movements."
Capital Economics also downgraded its forecast for UK GDP growth in 2016 from just above 2% to 1.5%.