Severe GDP loss seen in no-deal Brexit

British Prime Minister Theresa May says the deal she negotiated with the EU is the best deal available for jobs and the economy.
British Prime Minister Theresa May says the deal she negotiated with the EU is the best deal available for jobs and the economy.PHOTO: AGENCE FRANCE-PRESSE

GDP may fall by up to 10.7% in 15 years if without EU deal: UK govt

LONDON • Britain will suffer a major economic hit over 15 years if Parliament rejects Prime Minister Theresa May's Brexit deal and the country crashes out of the European Union (EU) with no new trade arrangements in place, according to official analysis.

A government report yesterday said gross domestic product (GDP) will be fall by 8 per cent to as much as 10.7 per cent by 2034 if there is no orderly exit and the supply of workers from the bloc dries up.

The new analysis paints a dire picture of the worst-case scenario but does not provide any detail on the economic impact of the deal Mrs May finalised with the EU last week. Instead, it provides an analysis based loosely on a plan that has already been rejected by the bloc.

The omission of Mrs May's agreement is likely to be politically awkward for the government because the numbers are intended to help inform politicians before they vote on whether to accept or reject the deal Mrs May has negotiated. The Bank of England was slated to publish its own analysis later yesterday.

"Our deal is the best deal available for jobs and our economy," Mrs May told Parliament.

If Parliament rejects her deal, Britain will be on course to crash out of the EU on March 29 into a legal limbo, with no special rules in place to regulate trade with the bloc. Backers of Mrs May's deal hope the findings in the analysis will bring wavering politicians - especial Conservative rebels - into line.

The government analysed various Brexit scenarios. 

 
 
 

The report said Mrs May's "Chequers" plan for close ties to the bloc, which the EU rejected, has the lowest impact on GDP, whereas the North-east of England - where most voters backed leaving the bloc in the 2016 referendum - will be the region worst hit by a no-deal Brexit.

It also said reducing net immigration from the EU to Britain would worsen the economic hit from any kind of Brexit, and the hit from a no-deal Brexit amounts to about £200 billion (S$352 billion) or more than £3,000 a person.

The analysis is almost certain to provoke a backlash from Tory Brexiteers, who say predictions of economic damage are part of "Project Fear" and insist a no-deal Brexit would leave Britain better off.

Mrs May appears to be heading for defeat in the parliamentary vote on whether to back her deal, which will be held on Dec 11, amid massive opposition from pro-Brexit rebels in her own Conservative Party.

They point to Treasury analysis published before the 2016 referendum that warned of a possible recession within two years and a significant rise in unemployment.

As it turned out, unemployment is at a four-decade low and the economy has recorded continued growth, though there is little dispute that investment and consumer spending have been adversely affected by Brexit.

The Treasury has been at pains to make clear that the analysis is a cross-government effort after arch-Brexiteer Boris Johnson privately accused Chancellor Philip Hammond's department of being "the heart of Remain" (no Brexit) and trying to ruin Britain's exit. Mrs May's office on Tuesday said that the work is an analysis rather than an official forecast.

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A version of this article appeared in the print edition of The Straits Times on November 29, 2018, with the headline 'Severe GDP loss seen in no-deal Brexit'. Print Edition | Subscribe