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No-deal Brexit Could Shock UK Economy.

Article Issue #33
No-deal Brexit and the UK Economy.

No-deal Brexit Could Shock UK Economy.

19 Jul, 2019 | BANKSY

It is been sent as a warning by the Bank of England that a Brexit without a deal could trigger a shock to the UK economy as well as causing disruption for EU companies depending on UK based banks. The Bank of England emphasized that the risk of Britain crashing out without a deal had grown but that City of London was ready to face such scenario and avoid banking failure as in the financial crisis of 2008. Yet, there would still be major disruptions for companies.

Mark Carney, the Bank’s governor, said: “The perceived likelihood of no-deal Brexit has increased since last year. Although the degree of preparedness for such a scenario has improved, material risks still remain.” He also added that although such disruption would primarily affect EU families and businesses, it could spread volatility and spill back to the UK in ways that cannot be fully foreseen or diverted.

It is also believed that about half of EU companies using banks registered in Britain could be let without their banking services after Brexit date. Britain has allowed UK companies banking with EU institutions located in Britain to keep on trading under normality; however Brussels has not taken similar steps. The central bank also reported that all of the UK’s main banks could continue trading without risk of collapse but banks could also withstand a rapid escalation of the trade dispute between the US and China.

Also it has been announced a crackdown on open-ended funds, a type of investment that can issue unlimited new shares to consumers. This is because it could pose risks to financial stability. Such funds can struggle to sell assets quickly enough to return money to investors if many of them pull their cash all at once. The Bank warned that it is considering banning consumers from making withdrawals at short notice for such funds.