The government’s latest analysis, entitled “EU Exit Analysis – Cross Whitehall Briefing” and dated January 2018, shows that UK economic growth will be between two and eight percent lower over the next 15 years if the UK leaves the European Union.
The report, which was leaked to Buzzfeed, makes clear that a so-called “no Deal Brexit”, where the UK is left to trade on WTO rules, would have the worst impact on UK finances and reduce growth by 8% compared to current forecasts.
In the alternative scenario of a comprehensive free trade agreement with the EU, the analysts predicted 5% lower UK growth over the next 15 years. The “softest-Brexit” option, where the UK remains within the customs union and single market, is predicted to have a 2% negative impact over the same time-frame.
Each scenario assumes the UK will have quickly agreed a trade deal with the US, will manage to roll over the majority of trade deals with other countries it currently has through the EU, and considers loosening regulations. They do not take into account the short-term shocks that Brexit could cause, such as the cost of adjusting the economy to new customs arrangements, which could make each situation worse.
The analysts predicted that a US trade deal would have a 0.2% positive impact on UK GDP, and similar deals with China, India, Australia, the Gulf nations, and the countries of Southeast Asia combined would together add a further 0.1% to 0.4% to GDP over the long term. However, even with each of these deals agreed, the overall impact of Brexit would be a hit to the UK economy of 1.4% – 7.4%.
The analysis shows that almost every sector of the UK economy will be negatively impacted by every Brexit scenario, with chemicals, clothing, manufacturing, food and drink, automotive, and retails hardest hit.
Every region will also feel the negative consequences in each scenario, with the North East, West Midlands, and Northern Ireland facing the biggest challenges. The analysis does not take into account the further damage to Northern Ireland possible from a hard border.
The impact on London under WTO rules or a free trade agreement would be particularly stark, with the city’s status as a financial capital severely eroded.
The leaked analysis is believed to be the same report that is being shown to key cabinet ministers one-by-one this week ahead of Brexit cabinet subcommittee discussions scheduled for next week. Ministers have reportedly only been shown the document under supervision and have not been allowed to remove the documents from the room after viewing.
When asked by Buzzfeed why the government was not making the analysis public, a source within the Department for Exiting the EU (DExEU) replied: “Because it’s embarrassing.”
It is unclear whether David Davis had access to this report when he denied that his department had carried out any in-depth impact assessments in December, having previously promised he was working on such reports.
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