Britain will scrape by without a full-blown recession over the next two years as a weaker pound cushions the Brexit shock and panic subsides, Standard & Poor’s has predicted.

“We’re not in the Armageddon camp,” said Jean-Michel Six, the rating agency’s chief economist for Europe.

"Devaluation acts a shock absorber. It stimulates exports and makes the London Stock Exchange more attractive to foreign investors,” he said.

The UK economy should muddle through with growth of 1.5pc this year, 0.9pc in 2017, and 1pc in 2018, shielded from the storm by fiscal largesse and monetary stimulus a l’outrance.

The benign outcome assumes that the Bank of England will cut interest rates to zero and relaunch quantitative easing, buying £100bn of bonds in each of the next two years.

It also assumes that Britain joins the European Economic Area – the "Norway model" – or a close equivalent that safeguards full access to the single market and preserves the City’s passporting rights for financial services.

“If that does not happen, it could be extremely negative,” said Mr Six. A hostile EU divorce could push the housing market into a downward spiral as an exodus of migrants compounds the damage from an economic slump.

The agency warned that devaluation has its drawbacks but the net effect in these specific circumstances is positive. “Down the road, by the end of the year or early next year, the inflation effect will hit real incomes and weigh on consumption,” it said.

David Fuller's view

Here is a PDF of this article and you may be interested in the closing comments on Italy.

The UK may favour a version of the “Norway model” for the UK, on the basis of national unity, as the 52 to 48 referendum result was clear but not overwhelming.  Meanwhile, lengthy, perhaps acrimonious negotiations with the EU would be in no one’s interests and probably only increase support for Brexit within the UK, and perhaps also some other countries within the EU.