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'I would be quite surprised if there wasn’t a recession in the UK'

Andy Serwer
Editor in Chief

Is Brexit the "most disastrous single event in British history since the second world war?" So says Martin Wolf, London-based chief economics commentator at the Financial Times, and one of the world’s most thoughtful business columnists.

So, could it really be that bad? “I think so, in terms of its economic effects over the short and medium term and its political effect over the longer term. I can’t think of an event comparable. The only one that has come to mind was our decision to invade the Suez Canal back in 1956 which lead to the fall our prime minister and ignominy. But it didn’t do anything like economic damage it looks like this one could likely to do,” Wolf says.

Wolf isn’t particularly sanguine about the financial markets, especially Britain’s over the short term: “I think the main point is the uncertainty is unavoidable until this is revolved one way or another, and it’s difficult to see that happening quickly. I think investors will make the decision to delay their decisions. So there will be less investment. That is bound to lower activity [and] demand in the economy significantly. The banks have been very badly hit already in terms of their stock prices. I expect them to become much more cautious about their lending.”

Bottom line says Wolf: “I would be quite surprised if there wasn’t a recession in the UK.” Wolf says that a depression, or even a contraction on the order of what occurred after the financial crisis of 2008 – where the UK economy shrank by 7% – is less likely. “I would be very surprised if we don’t have a year or two or three of a real recession,” he says.

I asked Wolf if he thought manufacturers would leave Britain. “It seems to me that a large number of companies from around the world have set up in Britain as a relatively competitive, flexible, not too expensive, highly integrated into the European economy production base, and they’re bound to have to rethink this,” he says. “I don’t expect them all to leave, but very few are going to come.” Over time, Wolf says, many would say, “we’ve got to go somewhere else.

Wolf acknowledges that there are probably some who are happy with the way things are unfolding. “There were some who will say, ‘well, you can’t make an omelet without breaking some eggs,’ but there will be lots of other people who will be shocked; they will start losing their jobs or fear for their jobs. That will focus their minds in a very different way. That’s really what matters.”

All of this suggests to Wolf that Brexit isn’t a story that’s ending any time soon.

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