Moody & # 39; s has issued a strong warning that the risk of a no-deal Brexit has "risen significantly" in recent months, expressing the magnitude of potential damage to the UK economy that is eroding without an agreement.
Britain would be in recession, according to the rating agency.
While the UK and the EU were "likely to take rapid steps to limit short-term disruptions," a disorderly exit would "clearly be more challenging than a negotiated exit," said Colin Ellis, lead author of the Moody's report.
"The immediate impact is likely to be felt first in a sharp decline in the British pound, which would temporarily lead to higher inflation and a decline in real wages in the two or three years after Brexit, which would weigh on consumer spending and growth with the risk of the UK going into recession, "said Moody's.
The report comes after Britain's Brexit Secretary Dominic Raab has said companies use Brexit as a "simple" excuse for lackluster results.
However, Moody's warned that if the UK leaves the EU without an agreement, it could have negative consequences for some of the country's most politically and strategically important sectors, including aerospace, aerospace, automotive and gas chemical sectors.
The "general credit fundamentals of the banking sector would weaken due to lower credit quality and lower profits" – partially offset by high levels of solvency and liquidity – while insurance companies could put pressure on sales and profits as weaker economic growth detracts from demand for insurance products.
Consumer credit derogations could increase as unemployment rises and real incomes continue to be depressed, while lower immigration and a weaker economy could also affect public services such as Transport for London and UK universities.
"In the case of a no-deal outcome, it would not be self-evident that the credit profile of the United Kingdom would be irreparably weakened: prompt and direct policies could in principle avoid material damage to the UK's economic and fiscal strength and hence credit quality." said Moody's.
"But the balance of risks would shift down, in which case we would have to carefully examine the longer-term implications for the UK credit profile and consider how the UK's creditworthiness might weaken and give some time to to evaluate the response of UK policymakers. "
Some of the UK's main trading partners in the EU, including Ireland, the Netherlands, Cyprus and Malta, were also at risk of adverse consequences should the UK crash.
However, the UK and the EU could extend the two-year bargaining deadline before 29 March 2019, the agency said, saying it will probably wait until it is clear that a non-trading outcome will be forthcoming before taking into account the longer-term implications Credit profile of the United Kingdom. "