UK 'in recession by 2019' unless free trade agreement secured if Brexit backed
Britain would lose £30 billion in exports and more than 1,700 UK firms would go bust if its fails to secure a free trade agreement (FTA) with Europe in the event of Brexit , a report has found.
The study by trade credit insurer Euler Hermes said a vote for Britain to leave the EU without an FTA would see gross domestic product (GDP) fall by minus 4.3 percentage points by 2019, dealing a major blow to businesses and UK exports.
It said a failure to secure an FTA after Brexit would also see export losses rocket to £30 billion by 2019 - a gap which would take 10 years to fill.
It added that while the impact would be less severe if Britain secured a post-2019 FTA after leaving the EU, GDP would still fall by minus 2.8 percentage points, triggering the loss of 1,500 businesses in three years on top of the 20,300 bankruptcies each year.
Ludovic Subran, chief economist at Euler Hermes, said: "Without a free trade agreement being agreed during exit negotiations, we expect the UK to be in recession by 2019 with significant drops in GDP and sterling, hampering turnovers and profit margins for UK companies.
"Even if a new trade deal with Europe is put in place, higher financing costs, divestment and a collapse in exports are set to create a challenging business environment."
The research found that a Brexit vote would have a significant impact on the Netherlands, Ireland and Belgium, which all have strong exports and cross-investment ties with the UK.
It added that a fall in UK GDP and depreciation of sterling following Brexit would also spark a drop in UK imports from across the eurozone. It said this would lead to 23.5 billion euros (£17.9 billion) in cumulative export losses in goods and services for the single market from 2017/19 if Britain fails to reach an FTA with Europe.
Germany's export market would also suffer, the study said, with a loss of 6.8 billion euros (£5.1 billion) in goods over the period, including two billion euros (£1.5 billion) for automotive manufacturers.