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Three-day week could be needed after Brexit, OBR warns

Thu, 11th Oct 2018 14:44

(Sharecast News) - The UK could move to a 1970s-style three day week to conserve energy in the event of a worst-case Brexit scenario, the Office for Budget Responsibility warned on Thursday.

Asked to examine the possible scenarios resulting from an abrupt and disorderly Brexit, the OBR said there was a risk that a recession could lead to shortages of imported products, which could be aggravated if households and businesses try to stockpile goods.

"In a scenario where the UK and EU are unable to agree to the continued mutual recognition ('grandfathering') of existing product standards and professional qualifications, all existing goods may need to be re-approved before sale and services trade would be severely restricted by the loss of market access," the OBR said.

It added it could lead to bottlenecks of goods while waiting for approvals: "Should these bottlenecks turn out to be significant, it might prompt households and businesses to attempt to stockpile goods in advance, further aggravating the shortages."

Nevertheless, the OBR said it was "next to impossible to calibrate with any confidence the potential impact of this sort of scenario in advance.

"However, while not a direct parallel, it is worth noting that the 'Three-Day Week', introduced in early 1974 in response to energy shortages and increased militancy on the part of the miners, was associated with a fall in output of a little under 3% that quarter."

The OBR also said there would be no "Brexit dividend" for the public finances, something that Chancellor Philip Hammond had recently promised.

Prime Minister Theresa May also said that a "Brexit dividend" would help pay for higher spending on Britain's NHS, although some experts say it's highly unlikely that there would be any extra money as lower economic growth would balance out the effect of no longer paying into the EU budget.

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