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UK ramps up no-deal Brexit warnings as May faces battle in parliament

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UK ramps up no-deal Brexit warnings as May faces battle in parliament
FILE PHOTO - The Bank of England is seen in the financial district during rainy weather in London, Britain, September 23, 2018. REUTERS/Henry Nicholls   -   Copyright  HENRY NICHOLLS(Reuters)
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By David Milliken and William Schomberg

LONDON (Reuters) – Britain’s government intensified its warnings about a no-deal Brexit on Wednesday, saying it would deliver a big blow to the economy while Prime Minister Theresa May’s plan, opposed by many members of parliament, would minimise the hit.

The government said that in a scenario resembling the agreement May struck with other European Union leaders, the economy would be 2.1 percent smaller in 15 years’ time than if the country remained in the bloc.

But the economy would be 7.7 percent smaller if there is no deal, the government said in a report.

The forecasts assumed no changes to migration rules but some non-tariff barriers.

The hit to the economy would be bigger at 3.9 percent based on May’s deal and 9.3 percent based on an assumption of zero net EU migration in the future.

Barely four months before Britain is due to leave the EU, May is struggling to overcome deep resistance within her own Conservative Party and among other political parties to the agreement sealed with EU leaders on Sunday.

Chancellor Philip Hammond said no Brexit option would be as good for the economy as staying in the EU, but May’s plan “delivers an outcome that is very close to the economic benefits of remaining in”.

The message from the government is likely to be echoed by the Bank of England which is due to announce its own shorter-term forecasts for the economy at 1630 GMT.

Both Hammond and BoE Governor Mark Carney have stressed the importance of a transition period, as included in May’s plan, to ease Britain out of its four-decade membership of the EU.

Carney said last week that the impact of leaving the bloc without a transition could be akin to the 1970s oil crisis for the world’s fifth-biggest economy.

(Editing by Guy Faulconbridge)

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