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Abu Dhabi, UAESaturday 23 June 2018

'It's embarrassing': Brexit impact reports shows every scenario will hit UK economy

In the worst-case ‘no deal’, the economy would slump by 8% over the next 15 years

Britain's Secretary of State for Exiting the European Union David Davis gets in a car in Downing Street. AFP/Daniel LEAL-OLIVAS
Britain's Secretary of State for Exiting the European Union David Davis gets in a car in Downing Street. AFP/Daniel LEAL-OLIVAS

The British economy will be worse off whatever deal is struck with the European Union, a leaked government report suggested.

The analysis, drawn up for the Brexit department and seen by the BuzzFeed News website, showed that growth would be lower under all of the three most likely scenarios

Under the “hardest” Brexit, in which the UK leaves with no deal and falls back on World Trade Organisation rules, economic growth would be up to 8 per cent lower in 15 years’ time than if it remained in the EU.

Under a comprehensive free trade agreement with the European Union, growth would be 5 per cent lower than otherwise.

Even if Britain retains single-market access through membership of the European Economic Area, growth would be 2 per cent lower over the same period.

Importantly, all of the growth declines are relative and over a long period of time. The study suggests there would be less growth than if the UK had stayed in the EU, rather than saying the UK economy will actually be smaller in 15 years’ time than it is now.

Nevertheless, the leak is likely to further inflame the debate over Brexit within the Cabinet and offer more ammunition to those calling for a second referendum.

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It also brings little respite for Prime Minister Theresa May as she set off to China for a three-day trade mission, amid continued infighting and question marks over her leadership.

The study, entitled EU Exit Analysis, was intended to be shown to ministers in a series of secretive one-to-one briefings, and kept out of the public domain.

When asked why the analysis was being so jealously guarded, a government source told Buzzfeed: “Because it’s embarrassing”.

The document showed how almost every sector of the economy would be affected by all the three scenarios, with chemicals, clothing, manufacturing, food and drink, cars and retail the hardest hit.

It also showed how every region of the country would be damaged, with North East England, the West Midlands and Northern Ireland being hardest hit.

Quizzed about it in Parliament on Tuesday afternoon, Brexit minister Steve Baker slammed the leak as “an attempt to undermine our exit from the EU”.

He added that the analysis did not "consider the desired outcome" of the government – namely a bespoke free trade agreement.

But Labour's shadow Brexit secretary Keir Starmer argued that that explanation was "not good enough", adding that the government was "piling absurdity upon absurdity."

Opposition MPs also grilled the government as to why, until recently, it had insisted that no impact assessments had been undertaken. One, Chris Leslie, criticised the government for "a cover up".

Speaking to The National, Adrian McMenamin, from the pro-Remain Open Britain group, urged the government to make its assessment public.

“They’ve repeatedly claimed this sort of analysis doesn’t exist, but yet here it is being leaked,” Mr McMenamin said. “There’s now a duty on the government to publish the analysis in full. What we can’t have is an open and honest debate on the impact of Brexit when they are hiding information from the people of Britain.”

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Earlier in the day, furious Eurosceptic MPs had been quick to dismiss the report.

Leading leave campaigner Iain Duncan Smith saying it had been “deliberately leaked”.

Speaking to the BBC, Mr Duncan Smith said: "The timing of this is highly suspicious.

"The fact you have a leaked document in the middle of an unfortunate and pointless row going on about whether or not we are going to have the right deal, whether Theresa May is doing the right thing... I find it highly suspicious."

Jonathan Isaby, Editor of BrexitCentral, added that previous modelling of this sort had been proven inaccurate.

A similar impact assessment published by the Treasury ahead of the EU Referendum, dubbed “Project Fear” by Brexit backers, predicted wide scale redundancies and economic gloom if the UK voted to leave. The latest forecasts are slightly better than those, in part because all the scenarios assume a new trade deal with the US.

“The Treasury has always taken a deeply hostile attitude to Brexit,” Mr Isaby told The National. “They have shown themselves time and time again to be hopeless at economic forecasting.”

“And without knowing what the arrangements are that the UK will have with the EU as we leave, there is no way of being able to make these forecasts anyway.”

The leak goes to the heart of the debate within government between those who support maximum distance from the EU, and those who want to stay close.

Last week, hardline Eurosceptics attacked Chancellor Philip Hammond for saying he anticipated only “modest changes” to the UK’s relationship with the EU after it leaves the bloc.

International Trade Secretary Liam Fox stepped into the debate on Monday by apparently telling fellow Eurosceptics that they are “going to have to live with disappointment” and accept a softer Brexit.

Mrs May’s inability to unite the Leave and Remain wings of her party has revived questions about her leadership, which first surfaced after last year’s general election in which she lost her parliamentary majority.

Around a dozen Conservatives have cast doubt in recent days about the stability of her position, with a number suggesting she could be replaced once a Brexit deal is concluded.

Speaking at an event for the Resolution Foundation thinktank, prominent backbencher Johnny Mercer said that the time was not right for a leadership contest, but that Mrs May’s time could be running out.

“How long has the prime minister got? I am of the view that any sort of change in leadership is not helpful at the moment and I don’t support that, but I do think the window is closing because politics can be quite a brutal game,” he said.