Economist warns of cost of hard Brexit

“Brussels pushed the UK too far,” says UNSW Business School’s Tim Harcourt. “The EU wanted to punish the British people for stepping out of line, but the schnozzle now runs the risk of hard Brexit with adverse consequences for Europe, and indeed the world economy.”

Domestic UK political events may seem half a world away – literally, for Australia – "but leaving the European Union without a divorce deal could plunge Britain into its deepest recession in nearly a century,” he says. “That should make everyone around the world pay attention.”

He suggests that with six months to go before the UK is due to leave the EU another milestone has come and gone. He warns that if the UK enters a hard Brexit by accident, official forecasts indicate the UK economy could shrink 8 per cent, while unemployment and inflation will soar. “The pound has already slumped 7 percent reflecting uncertainty about the terms of the UK's exit from the European Union.”

He feels business groups are getting twitchy. “Now, this won’t initially affect Australia business to a material extent, except we will face increased UK commercial competition in Asia and the emerging markets, but there is everything to play for.”

Most surprising is the way the pound gained in value in the past few weeks. “Chances are, the markets are now betting on Brexit being postponed for much longer,” he suggests.