British Robustness

As matters stand, the UK is scheduled to leave the EU on 29 March 2019. After UK Prime Minister Theresa May’s Withdrawal Agreement was rejected by a historically unprecedented 230 vote margin in the House of Commons on 15 January 2019, the UK could well leave at the end of March with no deal. Who will suffer more in this scenario — Britain or the Eurozone?

Most of the economic discussion has focused upon how bad such a no deal scenario might be for the UK. Some proposals are rather lurid. Last November the Bank of England published its estimates of the impact various Brexit scenarios. In the “Disorderly — No deal, no transition” scenario UK GDP was estimated to drop by 8 per cent within around 6 months. That (frankly rather absurd) scenario would put the impact of no deal on the UK economy as akin to the impact of a serious tsunami, a widespread famine, or occupation by a hostile power.

Britis ...