Deal or not, Brexit Is seen hampering U.K. economic rebound

Leaving the European Union’s single market will drastically undermine the U.K.’s recovery from a slump caused by the coronavirus pandemic, according to KPMG.

Britain’s economy will expand 7.2% next year, according to forecasts from the consultancy that assume the two sides can strike a trade deal. That’s 2.9 percentage points lower than it would have been if the country maintained its current relationship with the bloc.

Without a trade agreement, output will only rise 4.4%, KPMG said, highlighting the stakes for Prime Minister Boris Johnson as negotiators zero in on a possible deal. In any case, Brexit remains a cloud over the outlook even with the promise of Covid vaccines being rolled out in the next few months, hampering the recovery from an estimated 11.2% contraction in 2020.

“We need to brace ourselves for major changes,” KPMG Chief Economist Yael Selfin said in an interview. “Next year we’ve got a lot of uncertainty, whatever happens with Covid.”