Leading economists have warned that the British economy could suffer if the country leaves the European Union (EU) without a deal, following the overwhelming defeat of the Withdrawal Agreement in the British Parliament.
After surviving a no-confidence vote by a small margin on Wednesday in the wake of the rejection of the Brexit deal, British Prime Minister Theresa May will have to present an alternative Brexit plan to Parliament next Monday for another vote.
If the alternative plan fails to win the support of MPs, the so-called no-deal Brexit will become closer to occurring. Britain is due to leave the EU on March 29 as set in Article 50 of the Lisbon Treaty agreed by EU nations.
"If the UK crashes out with a 'no deal,' without transition arrangements, I think the shock would be severe," Amit Kara, head of UK macroeconomic research at the National Institute of Economic and Social Research (NIESR), an independent think tank, told Xinhua in a recent interview.
Kara warned the impact on trade in goods and services and even on movement of people and transport would be instant and negative as a result of unwinding a decades-long relationship between Britain and the EU.
"No one knows really just how much disruption there will be at the ports and in supply chains. It is very hard to call what is going to happen," Howard Archer, chief economic adviser to the EY ITEM Club, an economic forecasting group, told Xinhua.
Both the EU and Britain value highly their bilateral trade. In 2017, 44 percent of British exports were to the EU, while imports from the bloc accounted for 53 percent of all British imports, figures published by the British Parliament showed.
Kara said a sudden no-deal Brexit would bite into the British economy across the board, not just in trade data but also in jobs. "The effect would not just be on the manufacturing sector or just the services sector, it is much broader than that."
"It is things like recognizing professional qualifications. For example, there is mutual recognition but overnight you may not be able to practise as a lawyer -- or what happens to an engineer working in the UK on a short-term contract from France? I think that would be very disruptive," Kara said.
Economists say there would be immediate effects on the sterling and British government bonds, and would cause equity market volatility.
Kara predicted divergence on the stock markets, with the major British firms represented in the FTSE 100 doing well, seeing share prices rising as much of their business is global and measured in U.S. dollars, benefiting from a falling sterling.
However, the next tier of firms on the FTSE 250, with a more domestic focus, will very likely see their stocks fall, or at least perform less well than the FTSE 100, he said.
With the Brexit deal now rejected, the possibilities for the final outcome of Brexit are open, whether it is a delayed Brexit, no-deal Brexit or even no Brexit.
For Archer, he believed the MPs want some kind of agreement before quitting the trading bloc to avoid a no-deal Brexit, otherwise the economy will certainly suffer, even risk recession.
"Our best bet is that somehow they will manage to eke out some form of deal," Archer said. (One pound = 1.29 U.S. dollars)
