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Fifty/fifty chance of recession warns think tank

Britain’s economy will shrink this quarter and there is a 50 percent chance of recession before the end of next year because of the Brexit poll, a leading economic forecaster says.

The National Institute of Economic and Social Research, an independent think tank, said on 2 August the economic outlook had darkened since the referendum result and the BoE’s ability to respond is limited.

Elevated risk

“There is an evens chance of a technical recession in the next 18 months, while there is an elevated risk of further deterioration in the near term,” said Simon Kirby, the institute’s head of forecasting.

NIESR expects the economy to shrink by 0.2 percent in the three months to September, and for growth in 2016 as a whole to slow to 1.7 percent, instead of the 2.0 percent forecast in May.

This is the same as the International Monetary Fund forecast last month.

Weak growth

For 2017, NIESR sees growth of just 1 percent – the weakest since the 2009 recession and down from an earlier forecast of 2.7 percent.

It says it is likely to exceed 3 percent because of sterling’s 10 percent plunge since the Brexit vote on 23 June.

“This is the short-term economic consequence of the vote to leave the EU,” Kirby said.

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