Brexit will make UK worse off, government forecasts warn

The UK will be poorer economically under any form of Brexit, compared with staying in the EU, government analysis suggests.

Official figures say the UK economy could be up to 3.9% smaller after 15 years under Theresa May’s Brexit plan, compared with staying in the EU.

But a no-deal Brexit could deliver a 9.3% hit, the new estimates say.

Chancellor Philip Hammond said the deal was not just about the economy, but would deliver “political benefits” too.

The government’s Brexit deal faces a potentially difficult vote in the House of Commons on 11 December.

Before that vote the prime minister is touring the country to promote the deal and will be in Scotland later on Wednesday.

The Treasury estimates do not put a cash figure on the potential impact on the economy, but independent experts have said that 3.9% of GDP would equate to about £100bn a year by the 2030s.

The 83-page document does not attempt precisely to forecast the impact of Mrs May’s deal.

But it compares the likely impact of the proposals agreed by the Cabinet at Chequers in July and set out in the government’s White Paper with the alternative scenarios of Norway-style membership of the European Economic Area, a Canada-style free trade agreement with the EU and a no-deal Brexit.

The economy will expand under all the scenarios.

However, the report found that after 15 years, under all Brexit scenarios, the economy would still be smaller than if the UK had remained in the European Union.

Former Brexit Secretary David Davis questioned the research, saying previous Treasury forecasts had been proved wrong and were based on “flawed assumptions”.

Analysis

By BBC business editor Simon Jack

It’s official: Brexit will make us poorer than we would be staying in the European Union.

That is the conclusion of a cross-departmental government 15-year forecast.

How much poorer depends on which Brexit route the UK takes, but the most likely outcomes would mean a hit to the economy of £60bn and £100bn with a no-deal scenario costing nearly £200bn.

The 82-page report looks at four main scenarios.

They are: the government’s preferred outcome with frictionless trade; a standard free trade agreement, which means some friction at the border; a Norway-type arrangement, which would mean freedom of movement and ongoing rule taking; and finally, no deal.

Read more from Simon

Mr Hammond said the planned Brexit deal combined most of the economic benefits of remaining in the EU with the political benefits of leaving the EU.

Asked if the UK would be poorer under Mrs May’s deal, the chancellor said: “The economy will be slightly smaller in the prime minister’s preferred version of the future partnership.”

But he argued that staying in the EU was not politically “viable”.

Veteran Conservative Eurosceptic Sir Bill Cash said Mr Hammond was effectively arguing for the UK to stay in the European Union in his “extraordinary” statement.

He said the chancellor had ignored potential economic benefits of leaving the EU, asking: “What about the trade deals which could give us the most enormous opportunities throughout the world, if we are able to strike them?”

Under Mrs May’s deal, the UK would be able to negotiate trade deals during the transition period after 29 March’s Brexit day, but would not be able to implement them until the end of the planned 21 month transition period, which could itself be extended.

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