Over the long term, the UK economy would probably suffer painful losses in income. The repercussions for the euro area and Germany, by contrast, would be less severe and arguably manageable. However, the Bank of England warns of short-term disruptions to trade which could plunge the UK economy into recession.
The “Old Lady of Threadneedle Street” simulated a variety of scenarios to reach these conclusions4. In the worst case scenario, UK GDP might slump by as much as 8%. That would be a more severe recession than after the financial crisis, and it wouldn’t leave us unscathed, either.