Public borrowing in the UK could exceed £100bn ($124.89bn) over five years to 2020/21, PricewaterhouseCoopers (PwC) has said.
According to PwC's latest UK Economic Outlook report, the country is expected to face a budget deficit of around £67bn this year. This is more than £10bn above what was earlier forecast by the Office for Budget Responsibility's (OBR) prior to the Brexit vote.
The report adds that the deficit will continue over the years and fall to about £18bn by 2019/2020 on unchanged fiscal policies. This is in contrast to the OBR forecasting in March that the UK government will have a budget surplus by 2019/2020.
The forecast by the London-based firm follows the Institute for Fiscal Studies (IFS) predicting something on the same lines last week. It said the UK could face a £25bn hole in public finances by 2020.
By 2019–20, zero changes in policy coupled with lower growth could result in tax revenues being £31bn lower than forecast in the budget, it had said, adding that this could be offset by lower spending of £6bn if any payments to the EU budget are stopped. IFS had then also said that the deficit would limit UK Chancellor Philip Hammond's options in the upcoming autumn statement.
John Hawksworth, chief economist at PwC, said: "We expect the chancellor to adopt a pragmatic approach in his autumn statement, allowing borrowing to take the strain of slower growth, while adopting revised fiscal rules that give him more flexibility to boost planned public investment in priority areas such as housing and transport infrastructure. However, he doesn't appear to have the money for large net tax cuts and is likely to continue to bear down on non-investment spending by both central and local government."
The PwC report also speaks about UK GDP growth and trade prospects after Brexit. For the whole of 2016, the UK economy is forecast to grow at about 2%. This could be the highest GDP amongst all G7 countries, which apart from the UK include Canada, France, Germany, Italy, Japan, and the US.
For 2017, this would slow down to around 1.2% amid the uncertainty following the Brexit vote. While growth slows the UK is expected not to witness a recession next year.
Hawksworth said: "A decline in business investment is likely to be the main reason for the slowdown in real GDP growth next year, driven in particular by uncertainty about the UK's future trading relationships with the EU. But we expect Brexit to exert a long, slow drag on growth, rather than giving the economy a short, sharp shock."
PwC says while the UK faces clear risks while doing business with the EU amid Brexit, there are also some clear opportunities given its "relatively strong performance in exporting to non-EU countries since 2007".