By John-Paul Ford Rojas, business reporter
Britain’s fiscal watchdog has likened the possible scale of impact of a no-deal Brexit to the three-day week which saw the country plunged into crisis more than 40 years ago.
The independent Office for Budget Responsibility (OBR) said those events – when the UK was hit by industrial disputes and energy shortages – did not provide a direct parallel with what could happen in a disorderly Brexit.
It also said that it was “next to impossible to calibrate” in advance what impact a no-deal might be likely to have.
But the OBR added that it was “worth noting that the ‘three-day week’ introduced in early 1974 in response to energy shortages and increased militancy on the part of the miners, was associated with a fall in output of a little under 3% that quarter”.
The watchdog raised the spectre of a no-deal exit on 29 March prompting problems such as delays at the border, resulting in shortages of goods and stockpiling by households and businesses.
It noted that the government had published more than 75 technical notices giving advice about what might happen in a no-deal scenario.
Those plans aim to ensure stability for consumers and businesses, the smooth operation of business and infrastructure and public services, and to minimise economic disruption.
“Nonetheless, an abrupt and disorderly exit could have a severe short-term impact on the economy – weaker activity and higher prices – and on the public finances,” the OBR said.
The watchdog also said it seemed likely that the economy and public finances have been weaker than they might have been had the referendum result gone the other way.
It had previously forecast a hit to the economy in the wake of the result.
The OBR’s current forecasts assume a “orderly” end to the Brexit negotiations and a smooth transition but it said that crashing out without a deal was “not impossible”.
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Its latest assessment also called into doubt the positive impact that the freedom to strike trade deals after Brexit could have.
Studies suggested increased trade barriers would leave output in both the EU and UK lower than might otherwise have been the case and “the scope for trade deals with non-EU countries to offset these effects is likely to be limited”.