Treasury forecasts economic damage likely from Brexit

New long-term UK Treasury forecasts on May's Brexit deal estimate increases in government borrowing and reductions to GDP growth with figures worse under a no-deal scenario.

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The UK's gross domestic product will be reduced by an estimated 3.9 per cent over the next 15 years if the nation leaves the EU under the terms of the withdrawal agreement currently before parliament, according to a government forecast.But if the country leaves the bloc next March without reaching a deal and net immigration by European workers is cut to zero, GDP could be slashed by 9.3 per cent over the same period, predicted the Long-Term Analysis - an 83-page report compiled by the Treasury and several other government departments.The forecast, published on Wednesday, was proof that the withdrawal deal agreed between London and the EU27 would "minimise" the damage to the UK economy, according to Chancellor of the Exchequer Philip Hammond, who accepted that all possible Brexit options would leave Britain economically poorer, compared to remaining within the EU.

Analysis disregarded by May's political opponents

However, the analysis appeared to have little impact on political opponents to the withdrawal agreement - including many Conservative MPs - who appear ready to reject it in a parliamentary vote now set for December 11.David Davis, a Conservative MP who resigned as Brexit Secretary in the summer, described the analysis as a "propaganda onslaught", adding, "Treasury forecasts in the past have almost never been right and have more often been dramatically wrong."Although the Treasury document did not put a cash figure on the potential impact on the economy of Brexit, economists estimate that the 3.9 per cent reduction equated to a GDP reduction of about £100 billion a year by 2033. The analysis also found that government borrowing could be forced up by as much as £119 billion by 2035 if the UK quit the EU without a deal and up to £26.6 billion under Mrs May's plans.But answering questions in the House of Commons on Wednesday afternoon, Mrs May claimed the UK would be "better off" under her Brexit deal. "Our deal is the best deal available for jobs and our economy, that allows us to honour the referendum and realise the opportunities of Brexit," she said."This analysis does not show that we will be poorer in the future than we are today - no, it doesn't. It shows we will be better off with this deal."But Labour Party leader Jeremy Corbyn said it was easy for Mrs May to describe her deal as the best one because it was the only deal on the table. "The government's economic forecasts published today are actually meaningless because there's no actual deal to model, just a 26-page wish-list," he said, referring to the outline position paper for a future UK-EU trade deal to come into effect when the transition period ends, probably in December 2020.

Business backing for May's deal

Nevertheless, the withdrawal agreement has received backing from many businesses, with both global chemicals company Ineos and British Aerospace voicing their support on Wednesday while the British car industry warned a 'no deal' exit would prove "disastrous".The Confederation of British Industry reacted to the economic analysis by saying it showed the damage a no-deal Brexit would have on the economy.Rain Newton-Smith, the organisation's chief economist, said: "These forecasts paint a bleak picture over the long-term of a no deal Brexit or a Canada-style deal."It surely puts to bed some of the more far-fetched ideas that a hard-landing Brexit will not seriously hurt the economy."This is about real people's lives and jobs in the years ahead and it's clear to business that while the government's deal is not perfect, it certainly fits the bill in reducing short-term uncertainty and opens up a route to a decent trade deal in the future."
Follow the link for official communication explaining the UK Government's Brexit Deal.

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