The Economic Reality of Brexit

The Independent reports today that a majority of voters believe the economy will be negatively affected by Brexit.

The last few months have proven difficult for the Government’s economic policy, with Philip Hammond engaging in what appears to be damage limitation, rather than enthusiastically embracing the so-called “opportunities” which Brexit promised. However, last week was when the economic impact really began to hit home.

Firstly, it emerged that there was no guarantee that Britain’s membership of some 65 EU trade deals would roll-over during the transition phase, potentially leaving the UK subject to EU trade rules without any of the benefits. Indeed, some non-EU member states such as Chile, who would have to agree to the UK remaining in trade deals, are already demanding concessions from the Government on issues such as agriculture.

On Monday, stock markets tumbled with the FTSE 100 falling 1.9%. Most economists indicated that this was a correction and not a cause for concern in itself, given recent market stability. However, it could indicate a more volatile global economy in the future with some alarm bells already sounding.

On Wednesday the Government’s regional impact assessments of Brexit were leaked, revealing an 8% drop in GDP if we crash out of the EU with no deal, and a 5% drop under the Government’s preferred option of a bespoke trade deal. Even leaving the EU and remaining in the Single Market will cost us 1.5% of GDP. To give you an idea of what this means in reality, UK GDP growth hit -2.5% at its peak during the 2008/9 recession.

Of course, these impact assessments are based on models, predictions and assumptions. However, most Government policy, especially economic policy, takes into account an impact assessment so that ministers can make an informed decision about what is likely to happen as a result of said policy.

A responsible Government would not push ahead with any economic policy when faced with such dire numbers, especially when the global economic outlook is somewhat less certain than it was in 2016.

It’s time for the Government to come clean about the true cost of Brexit, and let voters decide for themselves whether it is really worth it.

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