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Brexit: Huge economic cost of leaving EU outlined in government study as May insists she has 'no doubts'

One region which voted overwhelmingly to leave the EU would suffer 16 per cent hit to economic growth in event of 'no deal'

Chris Baynes,Caroline Mortimer
Wednesday 07 February 2018 21:01 GMT
An industrial district in the north-east town of Middlesbrough, where 65 per cent of people voted to leave the EU
An industrial district in the north-east town of Middlesbrough, where 65 per cent of people voted to leave the EU (Getty Images)

North-east England, the West Midlands and Northern Ireland will suffer the biggest hit to economic growth after the UK’s withdrawal from the EU, according to secret Brexit impact studies released to MPs by the Government.

London will see the least damage, according to the controversial forecasts which ministers were forced to release amid pressure from Labour and pro-EU Tories.

MPs have been reading the documents, prepared by Whitehall officials for the Department for Exiting the EU, under controlled conditions, but the figures have been leaked.

It has previously emerged that officials expect the UK as a whole to be worse off after Brexit regardless of the terms of its departure from the EU.

According to regional forecasts, every area of the UK will suffer a decline in GDP.

The North-east would take an 11 per cent hit to economic growth under the Government’s preferred outcome of a free trade deal with the EU, while leaving with no deal will result in a 16 per cent dip, and staying in the single market would cause a 3 per cent decline.

The north-east overwhelmingly voted to leave the EU in the 2016 referendum.

In the West Midlands, a free trade deal would result in an 8 per cent hit to growth, compared with 13 per cent under no deal, and 2.5 per cent if the UK stays in the single market.

Northern Ireland would suffer an 8 per cent dip in growth after a free trade deal, a 12 per cent dip in the event of “no deal”, and a 2.5 per cent fall in the single market.

By comparison, London would sustain just a 2 per cent hit to growth if the UK gets a free trade deal, 3.5 per cent in a no deal scenario, and just 1 per cent if the country stays in the single market.

The details of the economic damage Brexit could do to the UK came as Theresa May spoke at a lavish black-tie event about her "ambitious" vision for the UK outside the bloc.

At the Tory party's annual Black and White Ball in London, Ms May told the assembled donors, celebrities and politicians: "Ever since the British people delivered their vote in the referendum, I have had no doubts about what our new relationship with the EU must mean for the United Kingdom.

"It will mean taking control of our money - so we are not sending vast annual subscriptions to the EU.

"It also means control of our borders - so we decide on our own immigration policy; one which attracts the brightest and the best to come to these shores, and one which also ensures we are investing in our own talent here at home.

"And it means control of our laws - so British courts are supreme and the European Court of Justice no longer overrules them."

She stressed her plan would mean leaving the single market and customs union but "constructing a completely new trading partnership with the EU".

Elsewhere in the secret report, it was revealed the UK retail sector – which is the country’s biggest private sector employer – could see its costs rise by 20 per cent after Brexit.

It also revealed the price of food and drink could rise by 16 per cent.

These costs are non-tariff barriers – meaning these are costs businesses will have to factor in before they pay any import or export taxes.

This means costs could potentially rise higher in the event of a no-deal Brexit.

The analysis said the potential no-deal Brexit could blow a £80bn hole in the public finances.

The papers suggest the government will need to borrow £120bn more over the next 15 years to make up the shortfall. When factoring in a £40bn in potential net gains from leaving the union – including £11bn in saved payments – this leaves a total cost of £80bn.

The Liberal Democrat's Brexit spokesman, Tom Brake, said: “This is a damning outlook for Britain. The Tories are putting everything on the line because they do not care about the lives and livelihoods of the people of the UK.

“The Government need to start being clear what they are fighting for. They are still keeping no deal on the table despite how crippling it would be to the regional economy.

“People did not vote to make themselves poorer. They should be allowed a vote on the final deal and a chance to exit from Brexit.”

Labour MP Stephen Doughty, a leading supporter of the Open Britain campaign for close ties with the EU, said: “It is utterly shameful that people all across this country are having to rely on leaks to find out how much damage a hard, destructive Brexit will do to their local economies and the country as a whole.

“The Government cannot continue to try and hide taxpayer-funded analysis from the public, just because they’re afraid of the political consequences. The full Brexit impact assessments, along with any other economic analysis of Brexit outcomes, must be published in full, now.

“And as people learn new facts about the costs of Brexit for their communities and their industries, everyone is entitled to keep an open mind about whether or not it’s the right path for the country.”

Earlier, Brussels released papers showing it wants to put in place a method to rapidly curtail the UK’s single market benefits if it breaches agreements on a transition deal.

But the Prime Minister insisted she would be “robust” in Brexit talks and dismissed “noises off” from the EU.

Asked during Prime Minister’s Questions if she would see off any “threats” from the EU, Ms May said: “We will be robust in our arguments.

“As I have said right from the very beginning we will hear noises off, we will hear all sorts of things being said about positions that are being taken.

“What matters is the positions we take in the negotiations as we sit down and negotiate the best deal. We’ve shown we can do that. We did it in December and we are going to do it again.”

Theresa May says the pessimistic analysis of post-Brexit trade is incomplete

Ministers in the European Union Exit and Trade (Strategy and Negotiations) Sub-committee considered the issues of immigration and Northern Ireland on Wednesday and are expected to discuss the crucial issue of the UK’s future relationship with Brussels on Thursday.

Meanwhile, the European Court of Justice (ECJ) has been asked to consider whether Britons living in the 27 other EU member states can retain their rights as EU citizens following Brexit after a case was brought by expats in the Netherlands.

A Government spokesman said of the regional impact studies: “This document does not represent Government policy and does not consider the outcome we are seeking in the negotiations.

“As ministers clearly set out in the House, this is provisional internal analysis, part of a broad ongoing programme of analysis, and further work is in progress.

“We are seeking an unprecedented, comprehensive and ambitious economic partnership – one that works for all parts of the UK. We are not expecting a no deal scenario.”

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