UK will be worse off under all Brexit scenarios, says official analysis

Vidya Ram London | Updated on November 28, 2018

British PM Theresa May

But PM May insists the deal is the only way to protect the economy

Britain will be worse off economically under the withdrawal deal agreed over the weekend between the UK and the EU than if Britain remained in the union, an analysis by the government published on Wednesday said.

While Prime Minister Theresa May insisted that the deal will not make Britain “poorer” but was the only way to protect the economy and respect the results of the referendum, Chancellor of the Exchequer Philip Hammond acknowledged the “cost” to the UK economy because of “impediments to trade.”

The analysis models a number of scenarios — including the case of no deal — and also encompasses different plans for the movement of people between the UK and the EU over a 15-year period. It suggests that Britain could, even with the Prime Minister’s deal, be up to 3.9 per cent worse off should free movement of people end entirely, though even if migration arrangements remain the same as now, the hit could be as hard as 2.1 per cent .

However, this remains significantly better than if Britain crashed out of the EU with either no deal or left with an average Free Trade Agreement,which has been dubbed the “Canada deal”, which could see a hit of up to 10.7 per cent and 8.1 per cent respectively.

The 86-page report warned that it considered just the potential economic impacts that arise from leaving the EU and that there was “inherent uncertainty” around the analysis. However, it said that “higher barriers” to EU-UK trade would lead to greater economic costs.

“Remaining in the EU would be a better outcome for the economy but not by much,” Hammond told the BBC, and added that one had to consider factors beyond the economic impact, such as political benefits from leaving, which the Prime Minister’s deal delivered on. However, at a heated session of the Prime Minister’s Questions, May insisted that it “doesn’t show we will be worse off.” She said it showed that Britain would continue to grow and there was a deal that continues to deliver on the will of the people.

However, the figures were leapt on by her critics including Labour leader Jeremy Corbyn who insisted that while the analysis was “meaningless” as there was no deal to model: just a 26-page “wish” list (a reference to the non-binding political declaration on future relations). The deal would secure the weakness of the economy and make British citizens poorer, he told MPs.

The figures come as May seeks to rally support for her deal ahead of a crunch vote in Parliament on December 11. The Labour Party, the Liberal Democrats, the Scottish National Party and the Democratic Unionist Party of Northern Ireland have all indicated their intention to vote against the deal, alongside many MPs from the Conservative Party. Some backing has come from business but it has been reserved.

Late on Tuesday, the Society of Motor Manufacturers and Traders (SMMT), which represents UK automakers including Jaguar Land Rover, pointed to the “critical need” for a withdrawal deal and a transition deal, warning of “catastrophic” consequences for the industry should Britain crash out with a no-deal scenario.

The uncertainty had already taken its toll, with nearly a third cancelling or postponing UK investment decisions as a result, with 12.4 per cent relocating UK operations overseas, and a further 12 per cent cutting headcount. “We need an ambitious deal for the future that guarantees frictionless trade with our most important market— nothing else will do, and we urge all parties to remember what’s at stake,” said SMMT Chief Executive Mike Hawes.

Meanwhile the government found itself embroiled in another controversy, as it declined to publish the full legal advice given to it on the Brexit deal, in spite of the House of Commons voting for a Labour resolution requiring it to do so. Instead, it is set to release a summary.

Published on November 28, 2018

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