GDP to be 4% lower in the longer term than it would have been had the UK stayed in the EU, new NIESR report reveals
A new NIESR report out today estimates that if the government’s proposed Brexit deal is implemented, then GDP in the longer term will be around 4 per cent lower than it would have been had the UK stayed in the EU.
The report, ‘The Economic Effects of the Government’s proposed Brexit Deal’, focuses on how the government’s proposed Brexit deal is likely to affect the economy. Main points include:
- If the government’s proposed Brexit deal is implemented, then GDP in the longer term will be around 4 per cent lower than it would have been had the UK stayed in the EU. This is roughly equivalent to losing the annual output of Wales or the output of the financial services industry in London. This is equivalent to a loss of 3 per cent in GDP per head, worth around £1,000 per person per annum to people in the UK.
- If the UK were to stay in a customs union with the EU, or if the Irish backstop position was to be invoked, there would still be a hit to GDP per capita of 2 per cent.
- Even if the deal is implemented, there will continue to be uncertainty about the precise shape of the future relationship beyond the transition period ending on 31 December 2020. Recent estimates, based on the UK’s performance relative to other similar economies, suggest that Brexit uncertainty has already reduced UK GDP by about 2 per cent relative to what it would have been if the UK had stayed in the EU. This uncertainty is a consequence of the 2016 referendum result.
The estimates presented represent the Institute’s considered view of the economic impact of the government’s proposed Brexit deal, but they are themselves uncertain as there is no historical precedent of a country leaving a major trading block such as the EU.
Garry Young, Director of Macromodelling and Forecasting, said ‘Leaving the EU will make it more costly for the UK to trade with a large market on our doorstep and inevitably will have economic costs. We estimate the long-run cost of leaving the EU on the government’s preferred deal to be roughly equivalent to losing the annual output of Wales.’
Notes for editors:
The full report, ‘The Economic Effects of the Government’s proposed Brexit Deal’, can be found here.
This report has been prepared for the People’s Vote campaign by the National Institute of Economic and Social Research (NIESR) and been undertaken solely to provide public information.
The scenarios reported represent NIESR’s assessment of the economic effects of the UK’s withdrawal from the EU under the assumptions made.
NIESR is Britain’s longest established independent research institute, founded in 1938. It has no institutional position on how or whether the UK should exit the EU.
For further information or to arrange interviews, please contact the NIESR Press Office or Luca Pieri on 0207654 1931/ l.pieri [at] niesr.ac.uk