Today’s we’re getting the first proper economic analysis of the Brexit deal agreed between the UK and the EU and signed off at yesterday’s Brussels summit. And it says that, under this plan, after 10 years the UK economy would be almost 4% smaller than if it would if the country remained in the EU.
The research was commissioned by People’s Vote, which is campaigning for a second referendum, but produced by the National Institute for Economic and Social Research (NIESR), an independent and respected economic thinktank.
The full report is being launched later, but here is the key NIESR conclusion.
Our key finding is that if the government’s proposed Brexit deal is implemented so that the UK leaves the EU customs union and single market in 2021, then by 2030 GDP will be around 4% lower than it would have been had the UK stayed in the EU. This is largely because higher impediments to services trade make it less attractive to sell services from the UK. This discourages investment in the UK and ultimately means that UK workers are less productive than they would have been if the UK had stayed in the EU.
Here is an extract from the People’s Vote news release (bold type from the original.)
Although the proposed UK deal envisages no tariffs or quantitative restrictions, the UK would not enjoy Norway’s full access to the EU’s single market through the European economic area or Switzerland’s comprehensive regulatory alignment through bilateral agreements that allow free movement of labour.
By 2030, at the end of the first decade outside the EU, this would have the following consequences:
The UK’s gross domestic product would fall by 3.9% – or £100bn annually.
GDP per head would fall by 3% a year, amounting to an average cost per person a year of £1,090 at today’s prices.
Total trade between the UK and the EU would fall by 46%.
Foreign direct investment would fall by 21%
Labour productivity would fall by 1.3%.
Tax revenue would fall by 1.5 – 2%, the equivalent of £18-23bn less to spend on public services at today’s prices.
The report underlines how continued uncertainty from the proposed deal’s lack of clarity about the UK relationship with the EU or the rest of the world means “business investment and economic activity is likely to continue to be even lower”. But, because it is impossible to forecast accurately the scale of this damage compared to staying in the EU, no figure is given for it and this study is therefore likely to be a conservative estimate of Brexit’s final cost.
And here is a chart from the report with the key figures.
Brexiters, of course, will dismiss this as nonsense, and it is true to say that the precise figures in long-term economic forecasts are almost inevitably bound to be inaccurate. But that does not mean that they cannot provide a reliable guide to long-term economic trends. To use an analogy popular with economists, if you eat pizza for lunch every day for the next 10 years, it is impossible to be certain what you will end up weighing, but you can be sure that it will be more than if you ate salad. The NIESR is the first expert body to produce an economic impact assessment of the specific deal on the table, but its assumptions and calculations are very much in line with those of mainstream economists, including the government’s, as became apparent when the government released details of its provisional Brexit modelling in March.
The government is expected to publish its own analysis of the impact of the deal later this week, possibly on Wednesday.
Here is the agenda for the day.
9.30am: Michael Gove, the environment secretary, gives a speech on climate change at the launch of the the UK Climate Projections 2018, the first major update of climate projections in nearly 10 years.
10am: The inquest opens into the death of the Welsh assembly politician Carl Sargeant.
10.30am: Theresa May chairs an unusual Monday cabinet which will discuss Brexit. (Normally cabinet meets on Tuesdays.)
12pm: The People’s Vote campaign launches a report from the National Institute for Economic and Social Research (NIESR) looking at the economic impact of May’s Brexit deal. Sir Vince Cable, the Lib Dem leader, Pat McFadden, the Labour former minister, and Anna Soubry, the Tory former minister, will be among the speakers.
1.30pm: Downing Street lobby briefing.
After 3.30pm: May makes a statement to MPs about yesterday’s EU Brexit summit.
As usual, I will also be covering breaking political news as it happens, as well as bringing you the best reaction, comment and analysis from the web. I plan to post a summary when I finish, after May’s statement is over.
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