Brexit Expected to Cause a Recession in the UK

A majority of private equity executives and distressed debt investors are expecting a recession to hit the U.K. economy in the next two years, according to a new report.

The country’s decision to leave the European Union is cited as the main reason that there could be an economic downturn.

“It looks like the British economy is already suffering its effect with higher inflation, lower consumer spending, in particular around the Christmas trading period, and growth rates well below other developed economies,” Carlo Bosco, managing director of Greenhill investment bank, said in the European Distressed Debt Market Outlook 2018 report, released by analysis firm Debtwire Wednesday.

56 percent of private equity executives and 57 percent of distressed debt investors said they expect a recession — defined as two consecutive quarters of negative economic growth — in the next two years. Most of the respondents predicted the recession will hit in 2018 rather than in 2019.

The International Monetary Fund (IMF) warned Wednesday that the U.K. needs to find ways to make its economy more efficient and that Brexit had already begun hurting the economy.

“Higher prices, caused by a weaker pound, have limited increases in people’s spending, and uncertainty about the future relationship with the EU has kept some business investments on hold,” the IMF said in its annual report on the British economy.

via CNBC

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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, Alfonso Esparza 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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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