Britain is likely to avoid entering recession after voting to leave the European Union if the Bank of England cuts interest and restarts its quantitative easing programme, ratings agency Standard & Poor’s said on Tuesday.
On Monday S&P stripped Britain of its triple-A credit status, downgrading it by two notches and assigning a negative outlook due to the weaker economic outlook and more complicated relations with the EU.
“Brexit is likely to represent a drag of about 1.2 percent of GDP for the UK in 2017,” Jean-Michel Six, S&P’s chief economist for Europe, the Middle East and Africa told a conference call for investors on Tuesday.
“We have a significant slowdown but growth remains positive although obviously in a much more disappointing way. That is because we anticipate a very strong monetary response on the part of the Bank of England, in the form of additional quantitative easing, in the form of a further cut in interest rates,” he added.
The economy could enter recession if house prices fell sharply, rather than stabilise as forecast, he added.