Strong stimulus programme needed in the event of a no deal Brexit warns RSM

A strong stimulus programme of tax cuts and incentives will be required to support the UK economy in the event of a no deal hard Brexit, according to audit, tax and consulting firm RSM.

The comments were made to an audience of business leaders from across the North West at a packed ‘Beyond Brexit’ event hosted by RSM in Warrington.

RSM’s US chief economist, Joe Brusuelas, and the firm’s Brexit lead partner Simon Hart, set out the possible consequences of a no deal hard Brexit, which could see GDP fall, inflation jump and wage growth slow, leading to a drop in overall living standards.

When asked what policy response would be required in the event of a no deal Brexit, Joe Brusuelas said: “First, you’re going to need to see interest rates go down to zero.

“The Bank of England will have to act boldly and aggressively, and sustain this for a longer period of time than many people think.

“It is notable that the Bank of England Governor has recently become much more explicit about this possibility than he has been in the past.

“Second, there will have to be tax cuts for both households and businesses to stimulate demand. And finally, there will need to be incentives targeted at jump starting productivity-enhancing investment which has recently ground to a halt.”

A live survey of almost 100 business delegates conducted during the event indicated that just over half (57%) believed the new PM is unlikely to break the Brexit deadlock before 2020, while more than a quarter (26%) thought this was possible.

When asked whether a no deal; the withdrawal agreement; a Customs Union; No Brexit; or any of these outcomes as long as we get certainty would benefit your business right now, almost half of the respondents wanted any conclusion as long as they knew what was going to happen.

In addition, almost a quarter (24%) opted for no Brexit as the most beneficial for their business, and 17% selected a customs union solution. Only six per cent and four per cent thought the withdrawal agreement and a no deal hard Brexit, respectively, would be the answer.

Simon Hart added: “We are in a period of exceptional uncertainty and the survey results highlight Brexit-fatigue has hit, and businesses just want certainty regardless of the final Brexit outcome.

“While businesses are hoping for the best they need to plan for the worst. Frankly, too many businesses were unprepared for the possibility of a no deal Brexit back in March, and the evidence suggests that not much has changed.”

He added: “Indeed, there may be up to 150,000 small and middle market businesses who currently trade with the EU who aren’t ready for the potential changes to customs processes.

“Whether this is because of time induced Brexit-apathy, ignorance or a ‘cry wolf’ mentality that’s set in following the missed March deadline, businesses need to take swift action to ensure they can continue to seamlessly trade with their EU customers and suppliers in the event of a no deal.

“The time to act ready for beyond Brexit is fast approaching.”

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