The influential credit ratings agency Moody’s has warned that a no-deal Brexit would represent a serious threat to the retail sector and plunge the country into a recession.
In a report released today Moody’s cautioned that if the UK withdrew from the European Union without a deal in place, the impact on the retail sector would be “substantial”.
Should a no-deal Brexit occur, the UK would be forced to trade with the EU with higher World Trade Organisation tariffs, which Moody’s warned would hit the retail sector hard.
It added: “The immediate impact of a no-deal Brexit would likely be seen first in a sharp fall in the value of the British pound, as was also evident after the 2016 UK-wide referendum on whether to remain in or leave the EU.
“The fall in the exchange rate would lead to temporarily higher inflation and hence a further squeeze on real wages over the following two to three years, which in turn would weigh on consumer spending and depress growth.”
These factors are expected to plunge the UK into “recession very quickly”, and the warning comes ahead of the publishing of the government’s next set of papers on what would happen in a no-deal Brexit scenario.
Moody’s added that the likelihood of a no-deal scenario has “risen materially”, though it said that it expected a deal to be made “eventually”
This morning the Brexit Secretary Dominic Raab challenged the EU, warning them that should an exit deal not be reached, the UK would not pay its £39 billion divorce bill.