Brexit: Theresa May’s plan will cost people £500 a year, economists warn

Gloomy forecast comes as foreign secretary suggests the UK will crash out of the EU without a deal – unless Brussels changes course

Rob Merrick
Deputy Political Editor
Thursday 02 August 2018 10:09
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Brexit: Theresa May secures Cabinet backing after meeting at Chequers

Theresa May’s Brexit plan will cost people £500 per year, economists are warning – while a no-deal departure would impose an £800 bill.

The National Institute of Economic and Social Research (NIESR) has made the first calculation of the price of the prime minister’s Chequers proposals, which would weaken economic ties.

Its gloomy forecast came as Jeremy Hunt, the foreign secretary, suggested the UK crashing out of the EU without a deal is now inevitable, unless Brussels changes course.

Speaking after talks with his counterpart in Vienna, Mr Hunt warned: “At the moment we are heading for no deal by accident.” A change from last week, where he claimed a no deal was “a real risk”.

The NIESR study warned the UK economy was on course to grow at its weakest rate since 2012, even if it retained nearly full access to the EU for its goods and services.

In contrast, the white paper that followed Chequers only seeks to protect goods by maintaining alignment with the EU, while excluding services – even though they make up 80 per cent of the UK economy.

For that reason, Britain’s leading service industries have strongly attacked the proposals, the Commercial Broadcasters Association suggesting they had been “thrown under the bus”.

In its report, the NIESR said: “The output loss will amount to £500 per person per year over time compared with the soft Brexit scenario. The loss would be around £800 under a ‘no deal’ Brexit.”

It added: “These estimates do not include the likely impact on productivity which could, on some estimates, double the size of the losses.”

Pro-EU politicians seized on the conclusions as fresh evidence of the need for a fresh referendum on the Brexit deal – which The Independent is calling for through its Final Say campaign.

Vince Cable, the Liberal Democrat leader, said: “These figures make explicitly clear that people up and down the country will be worse off if the UK leaves the EU. That is the truth behind the cost of May’s Brexit.

“No one voted to have less money in their pockets. No one deserves to be punished because of the mess created by the Conservatives.”

Alison McGovern, a Labour supporter of the People’s Vote campaign, said: “This crucial report demonstrates that it is very hard to see any upside to Brexit.

“What’s more, we know that those areas dominated by manufacturing will be worst off of all. And the national economic situation will rob Britain of the chance to invest in decent public services.”

Meanwhile, in Vienna, Mr Hunt again claimed the EU would suffer if it failed to back the Chequers plan as a “pragmatic solution”.

Speaking after his talks he said on Twitter: “We want the EU to prosper but there is a real risk of a messy divorce which would be a geostrategic mistake.”

And, having urged EU capitals to force Brussels to offer the UK better exit terms, he added: “Let’s not make this one of those moments where a terrible mistake is made which we are still talking about in 20 or 30 years.”

The NIESR said the UK economy would grow by 1.4 per cent in 2018 and by 1.75 per cent in each succeeding year – but only if close to full access was retained.

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