Credit Suisse Says Brexit Would Destroy 2% of UK GDP

A UK vote to leave the EU would trigger a snap recession, prompt a fall in share prices and house prices and knock as much as 2% off GDP, according to analysts at the investment bank Credit Suisse.

Wading into the debate over the upcoming referendum, they predict the UK will probably vote to stay in the bloc. But were the public to opt for Brexit, the consequences would be “drastic and long lasting”, say the analysts.

“If the UK votes to leave the EU, it is likely to entail an immediate and simultaneous economic and financial shock for the UK. We can expect a drop in business investment, hiring and confidence. A sudden stop of capital flowing into the UK could make the large current account deficit difficult to sustain and lead to a sharp fall in sterling,” write Sonali Punhani and Neville Hill, fixed-income research analysts at the bank.

“In its most extreme that could mean a level drop in GDP of 1% to 2% in the short term due to the toxic blend of depressed business confidence, tightening financial conditions, higher inflation and falling real incomes. In the medium term, we expect it to be negative for UK demand and supply, implying a weaker GDP growth path.”

via SOURCE

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza