Economists warn UK may be hit by recession in Brexit deal

There has been a sharp decline in the value of the pound with the rand strengthening to 17.97 to sterling on Friday.

Britain’s Prime Minister Theresa May. Picture: @10DowningStreet/Twitter.

JOHANNESBURG – Economists say the United Kingdom may be hit by a recession if a decent Brexit deal is not worked out soon.

There has been a sharp decline in the value of the pound with the rand strengthening to 17.97 to sterling on Friday.

UK Prime Minister Theresa May has been trying to gain support for her Brexit package but a number of ministers have resigned so far.

Economists are arguing that plummeting bank stocks are sending a clear message: a chaotic Brexit will plunge the UK economy into a recession.

However, May has called on her government to support the latest deal with the EU.

“If we get behind the deal we can bring our country back together and seize the opportunities that lie ahead.”

There was a dramatic market reaction to the resignation of key UK government ministers underscoring the steep price that the country is likely to pay if the country crashes out of the European Union without a divorce deal.

The resignations mean that the prime minister may face an uphill battle to win parliamentary support for the Brexit deal.

In the meantime, the rand has gained major ground against the pound.


May says she sees no alternative to the Brexit deal she presented earlier this week, amid reports that some of her senior ministers want her to renegotiate the draft agreement before meeting EU leaders next weekend.

“There is no alternative plan on the table. There is no different approach that we could agree with the EU,” May wrote in an article for the Sun on Sunday newspaper.

“If MPs (legislators) reject the deal, they will simply take us back to square one. It would mean more division, more uncertainty and a failure to deliver on the vote of the British people,” she added.

Just hours after announcing on Wednesday that her senior ministers had collectively backed her divorce deal, May was thrust into her premiership’s most perilous crisis when Brexit Secretary Dominic Raab resigned on Thursday to oppose the agreement.

Other mutinous lawmakers in her party have openly spoken of ousting her and said the Brexit deal would not pass parliament.

Brexit supporters say the transitional deal risks leaving Britain subject to EU rules for an indefinite period.

On Saturday Andrea Leadsom, the minister in charge of government business in parliament told the BBC that she was supporting May but was not fully happy with the deal.

“I think there’s still the potential to improve on the clarification and on some of the measures within it and that’s what I’m hoping to be able to help with,” she said.

Ireland’s foreign minister, Simon Coveney, said on Saturday that British pro-Brexit ministers were “not living in the real world” if they thought they could renegotiate the divorce treaty agreed with the EU last week.

Several British newspapers had reported that Leadsom was working with four other senior ministers and Brexit enthusiasts - Michael Gove, Liam Fox, Chris Grayling and Penny Mordaunt - to pressure May to change the deal.

Mordaunt, Raab, and five other top Conservatives - former Foreign Secretary Boris Johnson, Raab’s predecessor David Davis, Interior Minister Sajid Javid, Foreign Secretary Jeremy Hunt, and Work and Pensions Minister Amber Rudd - are all “actively preparing” leadership campaigns, the Sunday Times said.

More than 20 Conservative lawmakers have written to call for May to go, and a total 48 requests are needed to trigger a leadership contest.

The Sunday Times also reported Britain’s army had been ordered to step up contingency plans to help police maintain public order in case of food and medicine shortages after a “no deal” Brexit, citing an unnamed “well-placed army source.”

Additional information by Reuters

(Edited by Leeto M Khoza)