Brexit: Dominic Raab under fire over claim that Bank study shows no deal outcome 'worse for EU'

Analysis referred only to financial services – not overall economic health – Brexit department admits

Rob Merrick
Deputy Political Editor
Sunday 22 July 2018 20:54
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Dominic Raab is under fire after partially retracting a claim that the Bank of England believes the EU will be hit harder than the UK by a no-deal Brexit.

The Brexit department admitted to The Independent that the Bank’s analysis referred only to one aspect of financial services – not to each side’s overall economic performance.

The embarrassing concession sparked accusations that Mr Raab was trying to keep voters in the dark about the impact of crashing out of the EU without a deal.

The row blew up after he refused to explain the no-deal planning the government is making – despite insisting the UK would “thrive” in those circumstances.

“Dominic Raab tried to claim that a no-deal Brexit would be worse for the EU than for the UK,” said a spokesperson for the anti-Brexit People’s Vote campaign.

“Now he says he only meant derivatives, so he must know that for manufacturing, services and every other sector of our economy, no deal is the worst possible outcome.”

Derivatives are financial instruments typically traded by hedge funds to speculate on the future direction of interest rates, or the value of commodities.

Last week, Mark Carney, the Bank of England governor, warned the EU against failing to put in place a contingency plan for tens of trillions of pounds of outstanding derivatives after Brexit.

Such a failure would hurt the EU more than Britain because its banks and corporations trade mainly in the City of London and would be left scrambling to make alternative arrangements.

However, the International Monetary Fund (IMF) has warned the overall UK economy would suffer more than the EU’s – losing 4 per cent of national output, compared with 1.5 per cent across the Channel.

Furthermore, other organisations have reached similar conclusions, including, before the referendum, the OECD, which estimated a 5.1 per cent hit over 15 years from a no-deal Brexit.

The government’s own leaked internal analysis of a falling back on World Trade Organisation rules estimated a loss of up to 10.3 per cent of gross domestic product (GDP).

On the BBC’s Andrew Marr Show, Mr Raab was asked if he accepted the “really dramatic decline” for the UK’s economy, forecast by the IMF.

In reply, he said: “Well, there’s been all sorts of analysis done.

“The Bank of England has produced an analysis which showed that it wouldn’t be the best outcome for either side, but it would – in a material way, aspects – be worse for the EU side.”

Asked what Mr Raab was referring to, a spokesman for the department for exiting the European Union (DExEU) said it was the comments made by the Bank’s governor in evidence given to MPs last week.

Asked if he could point to any study predicting a bigger overall loss for the EU, he replied: “The Brexit secretary was referring to Mr Carney’s comments about derivatives.”

During the TV interview, Mr Raab condemned “hair-raising stories” that food will be stockpiled, and motorways turned into lorry parks, if Britain crashes out of the EU with no agreement.

However, he declined to say what preparations are being made, beyond the hiring of extra border staff, while hinting the public would be told more in the coming months.

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