The world’s largest fund management group has warned that it expects the UK’s “divorce” from the European Union to be “messy, drawn out and costly”.
In its latest investment report, BlackRock said the result means that the UK will now have to unpack UK and EU laws and strike trade deals with “a spurned trade deals”
It continued: “We expect potential losses in services exports and investment flows to overwhelm any benefits of lower payments to the EU.
“We see a weaker euro over time and pressure on European shares, credit and peripheral bonds such as Italian government debt du to likely European job losses and lower growth.”
Economists at different buy-side groups disagreed over the extent of the economic fallout for the UK economy, however.
Royal London Asset Management predicted the UK would head towards recession in the second half of the year while Schroders said it did not believe that would be the case.
Ian Kernohan, economist at Royal London Asset Management, said: “Given the sharp rise in uncertainty for households and firms, it now seems sensible to assume a UK recession in the second half of this year, with spending decisions postponed until the situation becomes clearer.
“The longer-term impact on economic activity depends on the new trading arrangements which the UK must now negotiate with the EU and the rest of the world.”
Azad Zangana, senior European economist and strategist at Schroders said he thought the UK could expect a slow down in employment and possibly a fall.
He said: “The fall in investment and hiring is likely to be felt by households as employment growth slows and possibly falls. Overall, we expect GDP growth to be considerably lower in the near-term, and inflation to rise sharply.
“Our Brexit scenario estimated a fall of 0.9% in GDP by the end of 2017 compared to our baseline forecast, and a rise in the level of CPI (consumer price index) inflation by 0.6%.”