FILE PHOTO: Euro and pound banknotes are seen in front of BREXIT letters in this picture illustration taken April 28, 2017.
REUTERS/Dado Ruvic/IllustrationLONDON (Reuters) - Failure by Britain and the European Union to agree a free trade deal would wipe an extra 2% off the United Kingdom’s economic output while driving up inflation, unemployment and public borrowing, official forecasts showed on Wednesday.
The independent body had already forecast Brexit would cost Britain 4% of GDP in the long run even if Britain secures a free trade agreement with the EU, compared to it staying in the bloc.
“This (no deal) would further reduce output by 2% initially and 1.5% at the forecast horizon,” it said.
“The imposition of tariffs on EU imports, higher non-tariff barriers, and a drop in the exchange rate all raise consumer prices, leaving them 1.5% higher by the forecast horizon than in our central forecast,” the OBR said.
Dado Ruvic, OBR
REUTERS, Britain, European Union, United, World Trade Organization