Treasury rejects OECD's suggestion for second referendum


The latest United Kingdom economic survey by the Organisation for Economic Co-operation and Development (OECD) is now projecting economic growth of just 1% in 2018, saying that the uncertainty of Brexit negotiations is likely to leave the United Kingdom without a free-trade agreement with the European Union by its official exit date in 2019.

In its latest assessment of the United Kingdom economy, the OECD projected growth of just 1% for 2018 and forecast that things would get even worse if a "disorderly Brexit" occurred and no deal was agreed with the 27-nation bloc.

OECD secretary general Angel Gurría warned that rising inflation sparked by a falling pound would "choke off" spending and investment, and said the government should avoid creating new trade barriers between the United Kingdom and EU.

But it warned the very real threat of no deal would spark a sharp reaction by financial markets, sending the exchange rate to new lows and leading to a downgrade in the UK's sovereign rating.

'Business investment would seize up, and heightened price pressures would choke off private consumption.

But the OECD said the risks could be avoided with a Brexit reversal.

In a report published on Tuesday, the global economic body said a second referendum or a change of government that would keep the United Kingdom within the European Union would have a "significant" positive impact on the UK's economic growth.

But this would mean an "ambitious EU-U.K. agreement and a transition period to allow for adjustment".

The sustained push by members of the government and Conservative back-benchers towards a "no deal" Brexit has caused many to ask questions about the ability of these political figures to understand the impact a failing United Kingdom economy has already started to have on working families across Britain.

Some economists have said the risk of no deal has increased in recent weeks, citing a divided British government and the EU's strict adherence to its negotiating guidelines.

The OECD said if the economy slows sharply, the government should find investments that would boost productivity and be started quickly.

"If this weak Tory government continues to refuse to act then the next Labour government will implement the plan needed to build an economy that works for the many, not the few", Mr McDonnell said.

It acknowledged the outcome of the Brexit negotiations is hard to predict.

"Meantime, however, uncertainty could hamper domestic and foreign investment more than projected and hurt consumption even more were the exchange rate to depreciate even further", the report said.

Brexit has compounded the challenge of reviving labour productivity growth, which the OECD said had come to a "standstill" and made "no meaningful contribution" to United Kingdom output since 2007.

To offset some of the damage, the OECD urged Hammond to spend spare funds on identifying ways to improve productivity, which measures the output per hour of an individual worker, by enhancing the skills of low-income workers.

The 140-page OECD report also says there's a need to improve productivity.

"We aim to agree a Free Trade Agreement that is comprehensive and ambitious".

Responding to the OECD report, Britain's finance ministry said increasing productivity was already a priority, citing its 23 billion-pound fund for infrastructure, research and development and housing.