PM’s Brexit deal to hit UK GDP for a decade

Prime Minister Theresa May’s Brexit deal will reduce UK GDP by 1.9-5.5% for a decade compared to remaining in the EU, a report published by think tank The UK in a Changing Europe forecast.

The report, called ‘The economic consequences of the Brexit deal’, found that if there is a no deal Brexit GDP will be hit by 3.5% to 8.7%.

The study said the large range reflects the uncertainties involved.

Anand Menon, director of The UK in a Changing Europe, said: “In all the sound and fury over the politics of Brexit, the economic implications have been somewhat lost from sight.

“Obviously, this kind of economic modelling needs to be treated with appropriate caution. However, our estimates provide a clear indication of the broad scale of the impact of the deal negotiated by the Prime Minister.”

Such a large economic impact would also have major implications for the public finances, which the would far outweigh any gains resulting from reduced EU contributions.

The Institute for Fiscal Studies estimated that if the impacts on GDP are as estimated, then in a no deal scenario the cost to the public finances would be between 1% and 3.1% of GDP, and between 0.4% and 1.8% if the deal was implemented.

This is after taking account of the long-term saving on the UK’s net EU contributions of 0.4% of GDP.

Professor Jonathan Portes, senior fellow The UK in a Changing Europe, said: “The Brexit deal would leave us in a customs union with the EU for the indefinite future – but it is a long way from frictionless trade.

“The additional trade barriers, combined with reductions in both skilled and unskilled migration from the ending of free movement, would leave the UK significantly smaller than it would otherwise have been over the medium to long term.”

The report does not model the short-term disruption resulting from no deal, which was the subject of an earlier UK in a Changing Europe report, ‘Cost of No Deal Revisited’.