By Jamie McGeever

LONDON (Reuters) - Britain will fall into recession over the coming year and growth in each of the next five years will be at least 0.5 percentage points lower as a result of Britain leaving the European Union, BlackRock Inc <BLK.N> said on Tuesday.

"Our base case is we will have a recession," Richard Turnill, chief investment strategist at the world's largest asset manager, told reporters at the firm's investment outlook briefing.

"There's likely to be a significant reduction of investment in the UK," he said, adding that Brexit will ensure political and economic uncertainty remains high.

Turnill and his colleagues expect the Bank of England to cut interest rates to zero this week from the current all-time low of 0.5 percent, and expand its quantitative easing bond-buying program next month.

"The market is not entirely priced for that yet," said Scott Thiel, BlackRock's deputy CIO and head of global bonds. This means sterling will fall further, although not as low as parity against the dollar unless in "extreme circumstances".

The BoE will resume buying gilts before dipping its toes back into the corporate bond market, Thiel said, noting the European Central Bank's success in narrowing corporate bond spreads through its bond purchases in that market.

Sterling hit a 31-year low of $1.2796 last week, down around 15 percent since the June 23 referendum although it has since clawed back some ground against the dollar and the euro.

New York-based BlackRock oversaw $4.7 trillion in assets globally as of March 31. Of that, $1.5 trillion was in fixed income assets.

The Brexit fallout will result in "materially lower" growth in the euro zone as investment plans are deferred, and have a "moderately" negative impact on U.S. and Asian growth, Turnill said.

Overall, BlackRock expects global investment returns to remain low across all asset classes thanks to more QE from the BoE, ECB and Bank of Japan, and the Federal Reserve keeping interest rates lower for longer than previously expected.

In a low-yielding environment, they favor emerging market bonds, developed market investment-grade corporate debt, and selected bank debt in the euro zone's periphery countries.

Equities are also a good bet even though Wall Street is trading at its highest levels ever, with easy global monetary policy continuing to support prices.

The dividend yield on global stocks is currently around 2.6 percent, an attractive proposition compared to ultra-low and even negative bond yields, said Charles Prideaux, BlackRock's head of active investments, EMEA.

(This version of the story has been refiled to include BlackRock RIC)

(Additional reporting by Swaha Pattanaik; Editing by Catherine Evans)