OECD issues stark economic warnings over Brexit

Money down the drain - PA

The UK’s economy is set to suffer further as a result of Brexit, the Organisation for Economic Co-operation and Development (OECD) has warned.

In the Paris-based think tank’s economic survey of the UK, it predicted economic growth in the UK will slow to one percent next year, and advised maintaining “the closest possible economic relationship possible” with the European Union.

Economic uncertainty and political instability in Britain following the vote to leave the EU have resulted in a fall in the pound, flatlining growth and an inflation rise which will “choke” private consumption, the international body reported.

A breakdown in talks with the EU, with ministers walking away from negotiations, would “trigger an adverse reaction of financial markets, pushing the exchange rate to new lows and leading to sovereign rating downgrades”.

Scottish independence or the instalment of the hard border in Ireland would also lead to “major negative economic impacts”, it said.

If the Brexit decision was reversed by a change in government or new referendum, the economic benefits would be “significant”, it added.

Launching the report in London, OECD Secretary-General Ángel Gurría said: ‌“The United Kingdom is facing challenging times, with Brexit creating serious economic uncertainties that could stifle growth for years to come.

“Maintaining the closest economic relationship with the European Union will be absolutely key, for the trade of goods and services as well as the movement of labour.

“Macroeconomic and fiscal policy can and should continue being used to support the economy, both during and after the exit negotiations. Future prosperity will depend on new reforms to improve job quality, boost labour productivity and ensure that the benefits are shared by all.”

The UK also has issues with productivity and the rise in insecure jobs, the OECD said.

Recommendations in the document included boosting wages, job security and skills to improve productivity and focusing more investment outside of London and the South East of England.

UK Chancellor Phillip Hammond said: “[By] delivering a time-limited transition period, avoiding a disruptive cliff-edge exit from the EU, we can provide greater certainty for businesses up and down the UK, and across the European Union.”

Liberal Democrat deputy leader Jo Swinson called the report a “significant intervention”.

“The case for protecting the economy by reversing Brexit is getting stronger by the day,” she said.

“Once the facts are clear at the end of this process, the British people must have the final say with a chance to exit from Brexit.”