The UK economy could fall into a recession next year after voting in favour of leaving the European Union, according to a forecast by the EU Commission.
Pierre Moscovici, the commissioner for economic affairs, said last week that the negative impact of the Brexit vote for UK GDP will be between 1% and 2.5% by 2017.
The UK is forecast to suffer from a “substantial slowdown”, limiting growth to between 1.3% and 1.6% this year, down from previous estimates of around 1.8% economic growth.
The most optimistic projection by the EU Commission is that GDP in the UK will expand by 1.1% next year, while the worst projection is a contraction of 0.3%.
The Commission said that the EU referendum “will affect not only the UK but also the rest of the EU economy through several transmission channels, mainly uncertainty, investment, trade and migration.
“In the near term, the main impact will be a large increase in uncertainty, both economic and political. These factors are expected to slow private consumption and investment growth and to impact on foreign trade, mainly in the UK, but also in the other Member States.”
The EU is forecast to expand by 1.6% this year and 1.8% in 2017, according to the Commission.
It should be noted that the Commission said that its assessment of the economic effects of a Brexit could change because of the extraordinary situation and uncertainty surrounding it.
The EU Commission said: “The UK’s ‘leave’ vote has generally increased risks to the outlook, particularly on the downside. The referendum has created an extraordinarily uncertain situation.
“Due to the lack of information about the new equilibrium after the UK’s exit, many elements have not yet entered the assessment but nevertheless constitute substantial risks to the outlook. As studies on the potential impact of a ‘leave’ vote had suggested, most of these risks are on the downside. They come on top of the previously identified risks.”