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Bank of England says no-deal Brexit would be worse than 2008 crisis

Britain crashing out of the European Union without a deal would trigger a deep and damaging recession with worse consequences for the UK economy than the 2008 financial crisis, the Bank of England has warned.

Raising the stakes as Theresa May battles to win support in parliament for her Brexit deal, the central bank said that failure to reach a deal with Brussels – with no transition period to a new trading relationship – would spark an immediate economic crash.

GDP would fall by as much as 8% next year, exceeding the depth of the recession that followed the financial crisis in one of the worst-ever peacetime capitulations for the economy.

House prices would fall by 30% and the unemployment rate would increase from its current level of 4.1% to about 7.5%, while interest rates would be forced to rise as inflation increased to 6.5%.

In sharp contrast, the Bank said May’s Brexit deal had the potential to encourage a bounce for economic growth over the next five years, relative to its current forecast, although only if Britain maintains the closest possible trading ties with the EU.

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