Britain could be forced to pay the European Union a “divorce bill” of €20 billion (£18 billion) in the wake of the Brexit vote.
The “upper estimate” to separate from the bloc would cover the UK’s shared EU liabilities including, unpaid debt of €241 billion (£217 billion), and €63.8 billion (£57.5 billion) in pension liabilities, according to new analysis conducted by The Financial Times (FT).
The study is the first attempt to put a realistic “price tag” on leaving the EU with some EU officials even warning that the cost could be substantially higher.
Former UK Trade Minister Lord Livingston said the cost spread over a year equates to £350 million a week.
In the run-up to the June referendum, Vote Leave repeatedly claimed £350 million was sent to the EU each week. It also claimed this money could be used to increase NHS funding if Brexit was successful.
However, just hours after the Brexit announcement, Ukip leader Nigel Farage said: “I can’t and I would never have made that claim – it was one of the mistakes that the Leave campaign made.”
London School of Economics Brexit expert, Professor Iain Begg, told The Independent: “The main implication is that, at least in the short term - stretching beyond not just a likely Brexit date (spring 2019) but the next UK general election - the UK will not achieve the reduction in its contribution to the EU budget that was promised in the referendum.
“The presumed windfall for the NHS will, therefore, become a disappointment. There might be a one-off settlement as part of a Brexit deal, but as the estimates in the FT article show it would be a huge bill.”
The disclosure is likely to cause more turmoil for foreign markets as the pound slumped to a 168-year low on Wednesday.
The pound dropped by almost one per cent against the dollar during a course of exchanges in the Commons before rallying, ending up around 0.73 per cent against the dollar at $1.22.
Economist Thomas Sampson told The Independent: “It’s important to remember that the exit bill would be a one-off payment and in the longer run it is likely to be dwarfed by the broader economic costs resulting from reduced integration with EU markets, particularly if the government pursues a hard Brexit.”
What experts have said about Brexit
What experts have said about Brexit
1/11 Chancellor of the Exchequer Philip Hammond
The Chancellor claims London can still be a world financial hub despite Brexit “One of Britain’s great strengths is the ability to offer and aggregate all of the services the global financial services industry needs” “This has not changed as a result of the EU referendum and I will do everything I can to ensure the City of London retains its position as the world’s leading international financial centre.”
2/11 Yanis Varoufakis
Greece's former finance minister compared the UK relations with the EU bloc with a well-known song by the Eagles: “You can check out any time you like, as the Hotel California song says, but you can't really leave. The proof is Theresa May has not even dared to trigger Article 50. It's like Harrison Ford going into Indiana Jones' castle and the path behind him fragmenting. You can get in, but getting out is not at all clear”
3/11 Michael O’Leary
Ryanair boss says UK will be ‘screwed’ by EU in Brexit trade deals: “I have no faith in the politicians in London going on about how ‘the world will want to trade with us’. The world will want to screw you – that's what happens in trade talks,” he said. “They have no interest in giving the UK a deal on trade”
4/11 Tim Martin
JD Wetherspoon's chairman has said claims that the UK would see serious economic consequences from a Brexit vote were "lurid" and wrong: “We were told it would be Armageddon from the OECD, from the IMF, David Cameron, the chancellor and President Obama who were predicting locusts in the fields and tidal waves in the North Sea"
5/11 Mark Carney
Governor of Bank of England is 'serene' about Bank of England's Brexit stance: “I am absolutely serene about the … judgments made both by the MPC and the FPC”
6/11 Christine Lagarde
IMF chief urges quick Brexit to reduce economic uncertainty: “We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making”
7/11 Inga Beale
Lloyd’s chief executive says Brexit is a major issue: "Clearly the UK's referendum on its EU membership is a major issue for us to deal with and we are now focusing our attention on having in place the plans that will ensure Lloyd's continues trading across Europe”
8/11 Colm Kelleher
President of US bank Morgan Stanley says City of London ‘will suffer’ as result of the EU referendum: “I do believe, and I said prior to the referendum, that the City of London will suffer as result of Brexit. The issue is how much”
9/11 Richard Branson
Virgin founder believes we've lost a THIRD of our value because of Brexit and cancelled a deal worth 3,000 jobs: We're not any worse than anybody else, but I suspect we've lost a third of our value which is dreadful for people in the workplace.' He continued: "We were about to do a very big deal, we cancelled that deal, that would have involved 3,000 jobs, and that’s happening all over the country"
10/11 Barack Obama
US President believes Britain was wrong to vote to leave the EU: "It is absolutely true that I believed pre-Brexit vote and continue to believe post-Brexit vote that the world benefited enormously from the United Kingdom's participation in the EU. We are fully supportive of a process that is as little disruptive as possible so that people around the world can continue to benefit from economic growth"
11/11 Kristin Forbes
American economist and an external member of the Monetary Policy Committee of the Bank of England argues that the economy had been “less stormy than many expected” following the shock referendum result: “For now…the economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction”
A Government spokesperson declined to comment on the claims.
"As the Prime Minister has said, we will invoke Article 50 no later than the end of March next year. We are not going to provide a running commentary on leaving the EU,” the spokesperson said.
- More about:
- European Union
- London School of Economics Brexit
- Ian Livingston
- Prime Minister
- Thomas Sampson
- Lord Livingstone
- Mr Farage
- Professor Iain Begg
- The Financial Times