The accountancy firm attributed such a downturn to the loss of confidence in both business and trade, and a drop in consumer spending - the principal driver behind GDP growth in the past three years.Coinciding with publication of the forecast was a survey from business advisers BDO whose research among more than 4,000 firms in the dominant service sector indicated optimism had fallen "dramatically" and was now at levels not seen since 2013.

Office for National Statistics: growth will weaken through 2019

However, data from the Office for National Statistics (ONS) on Monday showed the UK economy grew at 0.3 per cent in July, led by the service sector and considerably faster than analysts had been expecting. In the April-June quarter, the economy had contracted by 0.2 per cent.But the ONS added: "While the largest part of the economy, the services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019."

UK economy: serious consequences to losing access to the EU single market and customs union

The warnings from KPMG and BDO came in the wake of forecasts by the Bank of England and the Office for Budget Responsibility that losing access to the EU single market and customs union in the event of a no-deal Brexit would have serious consequences for the economy, including the likelihood of a recession.According to the KPMG forecast, if the UK did secure a trade deal with the EU27 ahead of the current exit date of October 31, it could boost GDP growth by 1.5 per cent in 2020.

First UK recession since 2009

But a no-deal Brexit, said Yael Selfin, UK chief economist at KPMG, could lead to a contraction in every quarter of next year, leading to the first recession since 2009 in the aftermath of the financial crisis.“With the Brexit debate poised on a knife-edge, the UK economy is now at a crossroads. It is difficult to think of another time when the UK has been on the verge of two economic out-turns that are so different, but the impact of a no-deal Brexit should not be underestimated,” she said.

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“Despite headwinds such as the slowing global economy and limited domestic capacity, the UK economy now has the potential to strengthen over the next 12 months. But a no-deal Brexit could put paid to this upside, triggering the UK’s first recession for a decade.”BDO said its survey suggested that a "recessionary mindset" has taken hold of the service sector, prompting fears that companies would invest less and hire fewer people, which in turn could create conditions for a recession, said BDO.

As no-deal Brexit becomes a possibility, business fears grow

Peter Hemington, corporate finance partner at BDO, said: "This month's dramatic fall in confidence is a very worrying event. Pessimistic companies don't invest or hire, which is how recessions start."The reason for this has to be that UK businesses have suddenly woken up to the fact that a no-deal Brexit is a real possibility."This reminds me very much of the aftermath of the 2010 election, when there was a sudden realisation that austerity wasn't going to be pretty. Sentiment collapsed as a result, and this was the precursor to a long period of very low growth that followed."Let's hope that we can avoid a no-deal Brexit, otherwise the next couple of years could be very uncomfortable."

For more news and views on the issues surrounding Brexit, visit our dedicated Brexit section. 

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