What happens next with Brexit could make or break the UK economy
The chances of Britain leaving the European Union with a deal on October 31 are fading fast. That’s likely to leave the country facing a general election which could lead to a ‘no deal’ Brexit or a new coalition government led by leftwinger Jeremy Corbyn that would give voters the chance to remain in the European Union.
Business hates the chaos that would accompany the first of those two scenarios. It would prefer Britain to remain in the European Union but has deep misgivings about Corbyn’s tax and nationalization agenda. A new report published Tuesday by the independent Institute for Fiscal Studies (IFS), an economic research institute, in association with Citigroup, examines the economic consequences of both potential outcomes.
The first scenario, where Britain crashes out of the European Union without a deal that protects trade, would wipe out two years of economic growth, according to the IFS. Prime Minister Boris Johnson insists he wants to follow this path if a deal cannot be secured before the October 31 deadline.
Tensions between Johnson and EU officials are rising, leading to an exchange of views on Tuesday that suggests a deal is out of reach.
“What’s at stake is not winning some stupid blame game. At stake is the future of Europe and the UK as well as the security and interests of our people. You don’t want a deal, you don’t want an extension, you don’t want to revoke, quo vadis?” European Council President Donald Tusk said in a tweet directed at Johnson.
“Talks in Brussels are close to breaking down,” a UK government source also said.
The most likely scenario now is that Brexit is delayed yet again, an outcome that Britain’s parliament has sought to ensure by passing a law requiring Johnson to seek an extension if he can’t get a deal with EU officials.
Opposition parties will then try to force an election in November. If Johnson wins, a no-deal exit is back on. The most likely alternative is a coalition government led by Corbyn’s Labour Party. The IFS report analyzes a scenario where the government holds a second referendum and Brexit is revoked.