Ever since the departure of Theresa May from the role of Prime Minister, a no-deal Brexit has looked increasingly likely. The election of Boris Johnson as PM has done little to assuage these fears, as he continues to assert that the UK will leave on October 31st despite the fact that a deal is far from being finalized.
It’s well known that a no-deal Brexit would hit the UK economy hard, shaving an estimated 3% from growth over the course of the next three years. According to the Organisation for Economic Co-operation and Development (OECD) this could push the UK into a recession whilst dramatically increasing the cost of trade with our European neighbours.
This would hit SMEs particularly hard, potentially forcing some to seek out small business loans in order to cope with the fall out. But how would a disorderly, no-deal Brexit impact on the rest of the world? We’ve outlined some of the potential consequences below.
Who Would be the Winners of a No-Deal Brexit?
For the most part, the focus has been on the countries that will benefit from a no-deal Brexit, with China and the U.S. thought to be at the top of this list.
In the case of the former, a new study by the United Nations Conference on Trade and Development has revealed that a no-deal Brexit could boost Chinese exports to the UK by around $10 billion. This accounts for 17% of the nation’s current exports into the UK, whilst the projected decline in the value of the pound is expected to be the biggest contributing factor.
By the same token, the value of U.S. exports would rise by $5.34 billion, whilst Japan would gain an estimated $4.9 billion according to the full details of the new study.
North America will also expect to secure a lucrative trade agreement with the UK in the event of a no-deal Brexit, with the U.S. likely to leverage its huge market size to secure more competitive terms and less stringent product standards. This principle may apply to other countries too, particularly larger entities such as India and Japan.
How Else will a No-Deal Brexit Impact on the World?
Whilst most non-EU countries can expect to access the UK market on lower tariffs than they currently do under EU trade, a no-deal Brexit could well threaten an already precarious global economic climate.
Make no mistake; there’s already a strong belief that the world remains on the cusp of a significant recession, with the International Monetary Fund (IMF) suggesting that this could arrive as soon as next year.
After all, this organization has previously discussed lowering its latest growth estimate from the current prediction of 3.2%, with this already established as the lowest forecast since the last global recession.
There’s no doubt that a no-deal Brexit could exacerbate these concerns, whilst making a global recession more likely than not in 2020.