Brexit damage to UK economy could be 'dwarfed' by benefits of strong global growth, says Lord O'Neill

'Maybe [better global growth] means the country’s going to be able to cope with Brexit better than certainly somebody like me might have thought some time ago', said the former Treasury minister

The damage to the UK economy from Brexit could be “dwarfed” by the positive impact of other developments in the global economy, according to former Treasury minister and Goldman Sachs economist Lord O’Neill.

“I share the views of many that Brexit is a really weird thing for the UK to impose on itself from an economic perspective,” he told the BBC.

“[But] maybe [better global growth] means the country’s going to be able to cope with Brexit better than certainly somebody like me might have thought some time ago.”

But he stressed that: “As important as Brexit is, it isn’t the most important thing facing Britain’s future.”

The global economy is projected by the International Monetary Fund to grow by 3.7 per cent this year, which would be the strongest expansion in seven years.

The world’s two dominant advanced economic blocs, the eurozone and the US, are both simultaneously growing strongly for the first time since the global financial crisis, helping UK exports.

A report by Cambridge Econometrics commissioned by the Mayor of London earlier this year projected UK growth to be 3 per cent lower by 2030 than it would have been if Britain remained within the EU’s single market and customs union.

“If that’s the worst that Brexit will deliver, then I wouldn’t worry about it,” Lord O’Neill said.

“My own view is if we go for a really hard Brexit or a no-deal Brexit, we’ll probably suffer more than that 3 per cent. But if it is only 3 per cent, [with] what’s going on with the rest of the world helping us and with productivity improving, that will easily dwarf a 3 per cent hit over 13 years, easily.”

Lord O’Neill, who was previously chair of Goldman Sachs Asset Management and joined the Treasury in 2015 to work on George Osborne’s Northern Powerhouse project, was also optimistic about regional rebalancing.

“I certainly wouldn’t have thought the UK economy would be as robust as it currently seems [a few years ago],” he said.

“That is because some parts of the country, led by the North-west, are actually doing way better than people seem to realise or appreciate.”

“As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK.”

The UK economy is estimated to have grown by around 1.6 to 1.7 per cent over 2017, and growth is projected to slow to 1.4 per cent in 2018 by the Office for Budget Responsibility.

Lord O’Neill dismissed the idea that if the UK economy does hold up reasonably well in the coming years it will be actually due to Brexit itself, rather than other factors.

“Brexiteers are going to be like the cat with the cream. They’re like ‘there you go, told you so’, which of course is ridiculous,” he said.

Lord O’Neill, who was given a life peerage in 2015, resigned from the Treasury in September 2016 having previously cited concerns that the new administration of Theresa May was not fully committed to the Northern Powerhouse.