Dun & Bradstreet predicts technical recession for UK in H2 2016
Markus Kuger, senior economist at Dun & Bradstreet, said:
“The ‘Leave’ campaign’s unexpected victory in the EU referendum has led to a sharp increase in political and economic risk. At Dun & Bradstreet, as an immediate response to the result we have downgraded the UK’s risk rating from DB2a (on a par with the US) to DB2c, and anticipate that there may be further downward revisions in the coming weeks and months. Although it’s impossible to comprehensively assess the economic impact of Brexit at this stage, we do expect that the UK will enter a technical recession in the second half of 2016. Dun & Bradstreet has cut the UK’s real GDP growth forecast for 2017 from 2.0% to 0.4%, while increasing forecasts for inflation, unemployment and the government deficit.
“Over the medium term, the most important question will be the nature of relations between the UK and the EU. Political developments, such as the outcome of the Conservative Party leadership contest and when Article 50 is invoked, will severely impact the economy. Against this backdrop of elevated uncertainty, investment activity will remain subdued and the UK faces a period of lower growth. Positively, we predict that the UK will maintain access to the EU’s common market once it leaves the EU; this limits the supply chain risk for organisations doing business with UK-based companies from the EU. However, in the worst case scenario that the UK loses access to the common market, there would be very negative repercussions for the wider economy, with the financial sector being hit particularly hard.”