A strong stimulus programme of tax cuts and incentives will be required to support the UK economy in the event of a no deal hard Brexit, according to audit, tax and consulting firm RSM.
The comments were made to an audience of business leaders from across the South West at a packed ‘Beyond Brexit’ event hosted by RSM in Bristol on June 28th.
RSM’s US chief economist Joe Brusuelas and the firm’s Brexit lead partner Simon Hart, set out the possible consequences of a no deal hard Brexit, which could see GDP fall, inflation jump and wage growth slow, leading to a drop in overall living standards.
When asked what policy response would be required in the event of a no deal Brexit, Joe Brusuelas, RSM’s US chief economist said: “First, you’re going to need to see interest rates go down to zero. The Bank of England will have to act boldly and aggressively and sustain this for a longer period of time than many people think. It is notable that the Bank of England Governor has recently become much more explicit about this possibility than he has been in the past.
“Second there will have to be tax cuts for both households and businesses to stimulate demand. And finally, there will need to be incentives targeted at jumpstarting productivity-enhancing investment which has recently ground to a halt.”
A live survey of business delegates conducted during the event indicated that just over a third (36%) believed the new PM could break the Brexit deadlock before 2020, while almost two thirds (64%) thought this was either impossible or unlikely.
When asked about the most likely outcome of the current impasse, 40% said they expected a further extension of Article 50 while 30% said they expected a General Election.
Simon Hart, RSM’s Brexit lead partner added: “We are in a period of exceptional uncertainty but while businesses are hoping for the best they need to plan for the worst. Frankly, too many businesses were unprepared for the possibility of a no deal Brexit back in March, and the evidence suggests that not much has changed.
“Indeed, there may be up to 150,000 small and middle market businesses who currently trade with the EU who aren’t ready for the potential changes to customs processes. Whether this is because of time induced Brexit-apathy, ignorance or a ‘cry wolf’ mentality that’s set in following the missed March deadline, businesses need to take swift action to ensure they can continue to seamlessly trade with their EU customers and suppliers in the event of a no deal. The time to act ready for beyond Brexit is fast approaching.”