Talks on Britain’s departure from the European Union have stalled over arrangements for the border between the British province of Northern Ireland and the Irish republic if a trading relationship is not agreed in time.“Our base-case scenario is that the UK and the EU will agree and ratify a Brexit deal,” S&P Global Ratings credit analyst Paul Watters said. “But we believe the risk of a no-deal has increased sufficiently to become a relevant rating consideration.”

S&P has an “AA” credit rating for Britain — a full step below its top-notch “AAA” rating — but it warned that any failure by London and Brussels to reach a deal would be likely to force it to cut the grade further.On Monday Chancellor Philip Hammond stressed the importance of getting a deal, saying this would dispel uncertainty weighing on businesses and allow him to spend money he is holding back as a reserve.Britain would experience a “moderate” recession lasting four to five quarters in the event of a no-deal Brexit, S&P predicted. This would shrink the world’s fifth-largest economy by 1.2 percent in 2019 and by a further 1.5 percent in 2020.“Most of the economic loss of about 5.5 percent (of) GDP over three years compared to our base case would likely be permanent,” S&P said.Unemployment would rise to above 7 percent from around 4 percent now and house prices would be likely to fall by 10 percent over two years, S&P said.In London, office prices could shrink by more than 20 percent over two to three years.Britain’s economy shrank by more than 6 percent during its last recession in 2008-09 which lasted five quarters, and growth in wages and productivity has been persistently weak ever since.Economists polled by Reuters earlier this month assigned a median one-in-four chance that Britain leaves the EU in March with no deal.