Reports paint grim picture of harm to economy from no-deal Brexit
The Bank of England warned the UK could be tipped into recession, while a Whitehall study said Britain would be worse off under any Brexit outcome.
Separate assessments from Whitehall and the Bank of England have painted a grim picture of the impact of a no-deal Brexit on the UK economy.
The Bank warned Britain could be tipped into a recession worse than the financial crash, with an 8% cut in GDP, unemployment surging by as much as 7.5% and house prices falling by almost one-third.
Meanwhile, a cross-Government analysis found the UK economy would be 9.3% smaller after 15 years if Britain leaves without a deal and falls back on World Trade Organisation rules, compared with remaining in the EU.
While the UK economy would continue to grow after withdrawal, Britain would be worse off under any Brexit scenario than if it stayed in the EU, the Government paper found.
Withdrawal under the plans set out in the Government’s White Paper would leave GDP up to 3.9% lower by 2035, according to the figures produced by officials from the Treasury and other Whitehall departments.
Public sector net borrowing could be forced up by as much as £119 billion by a no-deal withdrawal and up to £26.6 billion under a scenario similar to Mrs May’s plans.
The document did not put a cash figure on the hit to the economy, but independent experts say 3.9% of GDP will equate to around £100 billion a year by the 2030s, far outweighing the UK’s current contribution to EU budgets.
The stark findings will be seized upon by Theresa May in her bid to persuade MPs to back her Brexit plan, in order to avoid the uncertainty of a disorderly no-deal withdrawal.
But supporters of a second EU referendum said that they added weight to their call for a “People’s Vote” with Remain on the ballot paper.
Liberal Democrat MP Layla Moran, a supporter of the Best for Britain campaign, said: “I do not believe that people who voted Leave or Remain voted to give their families less money at the end of the month.”
Shadow chancellor John McDonnell said: “The Bank has confirmed what other independent reports this week have been telling us: a no-deal Brexit could be even worse than the financial crisis of 10 years ago, and the country would be much worse-off under Theresa May’s deal.
“Instead of ploughing on with this discredited deal the Government should set new priorities that would protect jobs and the economy.”
Labour appeared to be inching closer to backing a second referendum, with Mr McDonnell agreeing it will become “inevitable” if the House of Commons rejects Mrs May’s plan on December 11 and Labour is unable to force a general election.
In the House of Commons, Mrs May accused Jeremy Corbyn’s party of wanting to “cause chaos, frustrate Brexit (and) overturn the will of the British people” by backing a fresh vote in what she said would be “a betrayal of the many by the few”.
But Mr Corbyn accused her “shambolic” Government of trying to force her Brexit deal through the Commons on the back of a “wish-list” plan and without allowing MPs access to its full legal advice.
As Labour denounced the decision to provide only a summary of the advice as a violation of the sovereignty of Parliament, Speaker John Bercow indicated he was ready to consider a complaint of contempt.
The Bank’s report came under fire from a former member of its Monetary Policy Committee, Andrew Sentance, who described it as “highly speculative and extreme” and said it would “add to the view that the Bank is getting unnecessarily involved in politics”.
And prominent Conservative Brexiter Jacob Rees-Mogg said: “It is unusual for the Bank of England to talk down the pound and shows the Governor’s failure to understand his role. He is not there to create panic.”
In the Commons, Mrs May said the cross-Government analysis did not mean the country would be “poorer in the future than we are today”.
She told MPs: “What we have seen behind the analysis this morning is that our deal is the best deal available for jobs and our economy that allows us to honour the referendum and realise the opportunities of Brexit.”
But Chancellor Philip Hammond said that, in a “purely economic sense”, the UK will be worse off than if it stayed in the EU, though he insisted the PM’s deal “minimises” the damage.
The 83-page document EU Exit: Long-Term Economic Analysis was released as Mrs May set off for Scotland on the latest leg of her tour of the nations of the UK to sell her Brexit deal to voters.
It does not attempt precisely to forecast the impact of the deal agreed with EU leaders in Brussels on Sunday.
It compares the likely impact of the “Chequers” proposals set out in the Government’s White Paper with the alternative scenarios of membership of the European Economic Area, a Canada-style free trade agreement and a no-deal Brexit.
The scenario which most closely reflects the Government’s plan would see the Chequers deal tempered by some trade friction and with zero net immigration from Europe.
Under these conditions, GDP could be expected to be 3.9% lower 15 years after Brexit than if the UK remained. If frictionless trade was achieved, the cut would be around 2.5%.
GDP would be an estimated 1.4% lower with EEA membership and 4.9% with a Canada-style free trade agreement if migration levels remained the same. If net migration was cut to zero under a Canada-style deal the hit to GDP would be around 6.7%.
The North East, North West, Northern Ireland and West Midlands would be hardest-hit by a no-deal Brexit or a Canada-style FTA, while the pain would be more evenly spread under the scenario closest to Mrs May’s deal, with London worst hit.