S&P expects Brexit to result in strong headwinds for UK
S&P: Brexit to subtract 1.2 pp from GDP growth in 2017
S&P: Modest drop in house prices seen in 2017
S&P: Forecasts for UK should be taken with caution
S&P: Forecasts assume continued access to single market
Brexit would result in very strongheadwinds for the UK economy, which would only barely manage to avoid a full-fledged recession, one of the world´s most influential ratings agency said.
The UK´s decision to leave the European Union would subtract 1.2 percentage points from the rate of growth of the economy in 2017 and another percentage point in 2018, Standard&Poor´s said in a report.
As a result, it expected the Bank of England would cut Bank Rate to zero by the very end of 2016 and re-launch its programme of quantitative easing in 2017, notwithstanding the higher inflation resulting from a weaker pound.
"Heightened uncertainty following the referendum means that any forecasts about Brexit's economic impact ought be taken with caution," S&P said.
S&P´s forecasts assumed continued access to the European single market for Britain in 2017 and 2018 and that the BoE would be successful in keeping market turmoil in check.
The forecast for UK house prices was "rather benign", S&P said, as it projected a modest drop in 2017 and flat prices in 2018.
"If negotiations between the U.K. and EU become confrontational, the confidence effect on the housing market could be more severe," S&P said.
The main transmission channels between Brexit and the British economy would be: the sterling exchange rate; international trade and confidence.
Brexit was also expected to take its toll on economic activity in the euro area, to the tune of 0.8% of GDP over 2017 and 2018.