Brexit: Theresa May's deal could leave UK £100bn poorer each year in first decade outside EU, analysis shows

Prime minister will tell MPs to back her blueprint as 'there is not a better deal available'

Lizzy Buchan
Political Correspondent
Monday 26 November 2018 01:03
Brexit deal: Theresa May's draft withdrawal agreement explained

Theresa May’s Brexit deal could leave the average person more than £1,000 worse off per year in the first decade outside of the EU, according to the first independent analysis of Britain exit terms.

As European leaders endorsed the prime minister’s plan, new research revealed the agreement could hit the UK’s economy by £100bn a year by 2030, equating to an average of £1,090 per person.

The report by the National Institute for Economic and Social Research (NIESR), commissioned by the People’s Vote campaign, also warned that the government’s preferred outcome could see a 46 per cent hit to trade with the EU and a 21 per cent fall in foreign direct investment.

The report said: “Our key finding is that if the government’s proposed Brexit deal is implemented so that the UK leaves the EU customs union and single market in 2021, then by 2030, GDP will be around 4 per cent lower than it would have been had the UK stayed in the EU.

“This is largely because higher impediments to services trade make it less attractive to sell services from the UK. This discourages investment in the UK and ultimately means that UK workers are less productive than they would have been if the UK had stayed in the EU.”

It comes as Ms May was due to brief her cabinet on a dramatic weekend in Brussels, where the EU signed off on her proposals after 18 months of fractious talks.

She will also make a Commons statement where she will tell MPs to set aside their opposition to her blueprint as “there is not a better deal available”, an opinion echoed by senior EU figures.

The EU’s sign-off paves the way for a Commons showdown over the deal, which officials in Brussels have been told to expect on 10 or 11 December.

Experts from the NIESR have been running the rule over Ms May’s withdrawal agreement since it was published 10 days ago, comparing the economic impact of staying in the EU with various scenarios.

As well as the Brexit deal, the NIESR also examined the “orderly” no-deal, favoured by Brexiteers, which would reduce GDP by 5.5 per cent, or £140bn a year.

If the UK remained in a customs union beyond the transition period, through the so-called Irish backstop, it would still mean a hit to GDP of 2.8 per cent a year, the equivalent of £70bn a year, the research found.

The full report will be unveiled on Monday by cross-party MPs including Liberal Democrat leader Sir Vince Cable, Tory MP Anna Soubry and Labour’s Pat McFadden.

Sir Vince, a former business secretary, said: “This is a million miles from what the Brexiters promised two years ago and will create decades of uncertainty for business and investors.

“It is just a promise of jam tomorrow from a government that has so far delivered nothing but chaos.”

He added: “If anything, the bleak predictions contained in this report are an underestimate of severe damage our economy will suffer in the future if this deal goes ahead because it takes no account of the draining away of confidence in business and the impact on investors who no longer see the UK as a gateway to Europe.”

His concern was echoed by Mr McFadden, a business minister under Gordon Brown, who said the government’s argument that this “terrible deal” was preferable to a chaotic exit was a false choice.

“This report shows that the reality of this deal will leave Britain tens of billions of pounds poorer than if we stuck with the deal we’ve got – inside the EU,” he said.

“That should be the real choice offered to the British people now. If the Prime Minister cannot get her deal through parliament the right thing is to go back to the public and give them the final say, this time setting the reality of Brexit against the option of staying in.”

The prime minister will step up her efforts to sell the deal on Monday, where she will urge MPs to back the plan when it comes before parliament in December.

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She was expected to say: “This has been a long and complex negotiation.

“It has required give and take on both sides. That is the nature of a negotiation... And I can say to the House with absolute certainty that there is not a better deal available.

“My fellow leaders were very clear on that themselves yesterday.”

Rejecting the deal risks “more division and more uncertainty, with all the risks that will entail”, the prime minister will say.

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