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UK's GDP "to take 3.9% hit by 2030" under May's proposed deal, says report

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UK's GDP "to take 3.9% hit by 2030" under May's proposed deal, says report

UK's GDP "to take 3.9% hit by 2030" under May's proposed deal, says report
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The Brexit deal proposed by the British government and approved by the EU would cut almost 4% off the UK's GDP even a decade after leaving the Union, says a newly-published report.

The study was commissioned by the People's Vote campaign, which wants a second referendum on Brexit, but compiled by the National Institute of Economic and Social Research (NIESR), which claims to be independent of all political interests and free of any position on the UK's relationship with the EU.

The NIESR took three different scenarios and compared them with a situation in which the UK remained in the EU:

  1. The deal as proposed by the government, in which the UK leaves the EU next March with a 18-month transition period followed by a free trade agreement.

  2. A theoretical deal in which the UK leaves the EU but remains in a customs union after 2020 (the so-called 'backstop' option).

  3. An 'orderly' exit from the EU but without any deal. UK-EU trade would thus continue under WTO terms.

According to the report, the second option would have the least negative impact on the UK's economy while the third would be the most costly. The first option, which as things stand is the one the UK will ultimately take, lies somewhere between the two.

1. The deal currently on the table

If the UK leaves the EU under the terms of the deal put forward by Prime Minister Theresa May and approved by the EU, the NIESR predicts the following:

  • The UK's GDP in 2030 would be 3.9% lower than if it had stayed in the EU. That would be like losing the economic output of Wales, for example, or that of the financial services industry in London.

  • That amounts to a net loss of £100 billion (113 billion Euros).

  • It equates to loss in GDP of 3% (£1,090; 1,231 Euros) per person in 2030.

2. A deal with the backstop option - the least costly

If the UK leaves the EU in March 2019 but remains in a customs union with the bloc, the NIESR forecasts that:

  • The UK's GDP in 2030 would be 2.8% lower than if it had stayed in the EU.

  • That translates as a loss of £70 billion (79 billion Euros).

  • Per person that is a GDP loss of 1.9%, or £700 (790 Euros).

3. An orderly exit from the EU without any deal - the most costly

If the UK leaves the EU without any deal, trade between the two entities would revert to World Trade Organisation rules. The NIESR calculates that in this scenario:

  • The UK's GDP in 2030 would be 5.5% lower than if it had stayed in the EU.

  • That would mean a net loss of £140 billion (158 billion Euros).

  • It would represent a loss per person of 3.7%, or £1,330 (1,503 Euros) in 2030.

Unemployment also adversely affected

The report adds that under all three scenarios, both import and export volumes would decrease compared to a 'No Brexit' scenario, and unemployment would be higher.

NIESR adds that the negative impact on the jobless rate would peak in 2020 in the event of a 'No Deal', in 2021 in the 'Backstop/Customs Union' scenario and in 2022 if the current proposed deal is implemented.