The Bank Of England warns the UK Economy could collapse - vTomb

The Bank Of England warns the UK Economy could collapse

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Today is Thursday 29th November 2018 and we are commenting on the Bank of England’s statement yesterday which declared that Britain risks suffering an even bigger hit to its economy than during the global financial crisis 10 years ago if it leaves the European Union in a worst-case Brexit scenario in four months’ time and indicated that the economy could shrink by as much as 8% in about a year.

In addition, if this worst-case scenario happens, there would be a 25% tumble in the value of sterling — taking it close to parity against the dollar — a spike in inflation to 6.5% from around 2.4% now, and a jump in interest rates. House prices would fall by 30%.

Earlier in the day the UK Government issued a similar warning and these two reports are aimed at adding pressure on lawmakers to drop their opposition to the Brexit agreement that Prime Minister Theresa May struck with other EU leaders on Sunday, which is to be voted on in the UK Parliament on Dec. 11th.

Opponents to the Prime Ministers deal state that this is mere scaremongering and that Britain would be economically stronger outside the confines of the EU.

Either way, the important dates for us to note are the December 11th the vote in the House of Commons plus the 29th March 2019 when the actual exit is supposed to take place.

There is little doubt that sterling has weakened on this news and could weaken further as December 11th approaches. Of course, if the Prime Minister’s deal is rejected, she does have a little time to go back to the EU – but not much. So, we can expect to see sterling’s value fluctuate as that date approaches and with it the price of gold and silver, in sterling terms, are likely to rise. Naturally if the PM wins the vote then we can expect sterling to strengthen a little and gold and silver prices fall.

The biggest test however will be next March, and we can’t help but feel that no matter how strong the Brexiteers arguments are for withdrawal, there are going to be turbulent political and economic times ahead for the UK for a number of years to come, until new trading relationships and systems are fully implemented and effective.

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