Brexit could shrink UK economic growth by 8%

Brexit could shrink UK economic growth by 8%

According to a leaked government paper, the UK economy will grow up to 8% more slowly once it leaves the EU, irrespective of any Brexit deal it strikes.

The paper, which was obtained by BuzzFeed News, is titled ‘EU Exit Analysis – Cross Whitehall Briefing’ and was drawn up by the Department for Exiting the EU in preparation for a discussion at the Brexit cabinet subcommittee taking place next week.

The document analyses the potential economic impact of Brexit based on the three most likely scenarios. It does not model any bespoke arrangements of the kind Prime Minister Theresa May has suggested she will pursue, instead focusing on existing EU arrangements, such as its deals with Norway and Switzerland.

What does the paper say about economic growth?

The paper suggests that in the worst case scenario, the UK’s economic growth could be up to 8% lower over the next 15 years than if the country remained in the EU.

Even under the ‘soft Brexit’ scenario, which would see the UK retain access to the single market, economic growth could still be 2% lower than it would if Britain remained. If the UK is able to negotiate a comprehensive free trade agreement with the EU, economic growth would be around 5% lower compared with current forecasts.

The report found that in every scenario, almost every part of the economy would be negatively affected. It estimated that sectors such as chemicals, food and drink, clothing and the automotive industry stand to be the hardest hit.

On the other hand, the paper also concludes that a trade deal with the US could benefit GDP by around 0.2% in the long term. Additional deals with other countries, such as China, India, Australia and others, could add up to 0.4% to GDP over the same period.

How has the government responded?

The government has criticised the leak of the report, with some pro-leave MPs suggesting that it was intentionally leaked to cast a negative light on the Brexit process. Conservative MP Jacob Rees-Mogg warned that much of the previous economic modelling and forecasting surrounding Brexit has proved inaccurate, or exaggerated the negative impact.

A government source referred to the paper as an “early draft” in conversation with the BBC, and said that it was only part of the work that is going on to prepare for Brexit. The source insisted that the report was not necessarily accurate as is “is hugely dependent on a wide range of assumptions”.

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