No-deal Brexit would hammer output, UK firms warn: BoE survey

British businesses expect their output to drop sharply if Britain leaves the European Union next year with no deal and no transition, a Bank of England survey showed on Tuesday.

Prime Minister Theresa May’s Brexit plan has been agreed with the EU but faces deep opposition in parliament where it faces a vote on Dec. 11, raising the risk of no-deal Brexit economic shock.

The output of businesses would drop between 2.5 and 6.9 percent over the next 12 months in such a scenario, the BoE’s survey of 369 companies suggested.

By contrast, output could rise between 0.8 percent and 2.7 percent if a deal and transition period were agreed.

The BoE said just under a third of firms had made changes to their plans in preparation for Brexit, such as setting up new legal entities or altering their supply chains.

Other companies were cautious about spending to prepare for Brexit until it was needed.

Aerospace and car manufacturing firms — which operate with complex, “just-in-time” supply chains — were most worried about how their businesses would cope with a “no deal” Brexit.

The BoE said last week 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.

The BoE survey, conducted by its regional offices, took place between Oct. 22 and Nov. 29.