The Brexit deal agreed between UK Prime Minister Boris Johnson and European leaders could leave the British economy 3.5% smaller every single year, according to recent research carried out by the National Institute of Economic and Social Research (NIESR). The institute suggests that the Bank of England should seriously consider an interest rate cut sooner than later.
NIESR said in its report that the Brexit chaos has already affected the UK’s gross domestic product (GDP) growth. If the UK goes on with the current pace of ongoing uncertainty, the economy might see a 2% loss of output.
NIESR director Jagjit Chadha commented:
“The U.K. economy will
continue to suffer what we’re calling a ‘slow puncture. No pop, no bang, but a
slow puncture, as investment is deferred and delayed in the face of
uncertainty.”
The think tank estimated that Johnson’s deal would leave all sector pooper over the next ten years and cut tax revenue by 2.5%. Arno Hantzsche, an economist at NIESR, argued that the Bank of England (BoE) should be ready to reduce the interest rate, citing inflation below target level at 2%, stronger pound, and the global trade tensions.
BoE will decide the interest rate and deliver a fresh outlook on growth and inflation on November 7.