No-deal Brexit risks deepening U.K. recession: budget watchdog

The consequences of a no-deal Brexit continued to pile up Thursday as the U.K.'s budget watchdog warned of a recession and diplomatic language appeared to break down between the two sides.

Britain's Office for Budget Responsibility (OBR) said Thursday the U.K. might be entering a full-blown recession, and a no-deal Brexit could more than double the country's budget deficit next year

The OBR said the world's fifth-biggest economy appeared to have flatlined or possibly contracted in the second quarter, and the pace of growth "is likely to remain weak."

"This raises the risk that the economy may be entering a full-blown recession," it says in a report on the outlook for the public finances.

A no-deal Brexit would hurt confidence and deter investment and lead to higher trade barriers with the European Union, pushing down the value of the pound and causing the economy to contract by 2 per cent by the end of 2020, the OBR said, referring to forecasts by the International Monetary Fund.

A no-deal Brexit — something the two contenders seeking to be Britain's next prime minister say they are prepared to do if necessary — could add 30 billion pounds (nearly $49 billion Cdn) a year to public borrowing by the 2020/21 financial year, the OBR said.

The OBR also said the spending and tax cut promises made by Boris Johnson and Jeremy Hunt, one of whom is due to become prime minister next week, would put a strain on the budget.

'Running around like idiots'

If the United Kingdom opted for a no-deal, it would have to "face the consequences," the European Union's chief Brexit negotiator said in an interview to be published on Thursday.

Asked by the BBC what would happen if London tore up its EU membership card, Michel Barnier said: "I think that the U.K. side, which is well informed and competent and knows the way we work on the EU side, knew from the very beginning that we've never been impressed by such a threat. It's not useful to use it."

Barnier, who spoke to the BBC before the current Conservative Party leadership contest, said the Withdrawal Agreement "is the only way to leave the EU in an orderly manner."

The EU Commission's first vice-president, Frans Timmermans, told the BBC that U.K. ministers were "running around like idiots" when they arrived to negotiate Brexit in 2017.

Timmermans said he was shocked by the standard of the British negotiation after initially expecting a brilliant show.

"We thought they are so brilliant. That in some vault somewhere in Westminster there will be a Harry Potter-like book with all the tricks and all the things in it to do."

But then: "I thought, 'Oh my God, they haven't got a plan, they haven't got a plan.'"

Preventing a prorogue

Meanwhile, British lawmakers have put a roadblock in the path of any attempt to take Britain out of the European Union without a divorce deal.

Johnson, the front-runner to succeed Prime Minister Theresa May next week, has said Britain must leave the European Union on Oct. 31, with or without a deal, and has refused to rule out suspending Parliament to prevent lawmakers from trying to block his exit plan.

The motion, passed 315-274 on Thursday, requires Parliament to be sitting to consider Northern Irish affairs for several days in September and October even if it was suspended. That would put it in session throughout the run-up to Brexit day, complicating any bid by Britain's new prime minister to "prorogue," or suspend, the legislature.

It also contains a requirement for ministers to make fortnightly reports on progress toward re-establishing Northern Ireland's collapsed executive, to give lawmakers an opportunity to debate and approve those reports and, if Parliament has been suspended, to recall it in order to do so.

The measures do not amount to an outright block on suspending Parliament, but could make it much more difficult to bypass.

A junior culture minister resigned after being among 17 Conservatives who rebelled against the government to vote for 
the proposal on Thursday.

Business Secretary Greg Clark and International Development Secretary Rory Stewart both abstained on the vote, but don't plan to resign, their aides said.

British media reported pro-EU finance minister Philip Hammond, who is likely to be sacked if Johnson wins the top job, also abstained.

Hammond commented on Twitter: "It should not be controversial to believe that Parliament be allowed to sit, and have a say, during a key period in our country's history."