The Office for Budget Responsibility have today laid bare the cost of Brexit on borrowing. They estimate that the direct effect on borrowing will be £58.7 billion - £226 million a week – over the forecast period. The overall increase in borrowing is calculated at £122 billion compared to pre-referendum forecasts.
Commenting, Pat McFadden MP, leading supporter of the Open Britain campaign, said:
“Today, for the first time, there was an official cost placed next to the referendum outcome.
“Today, the real picture of Britain’s post-Brexit economy emerged – borrowing up, growth down, investment lower, prices higher.
“The eye-watering £58.7 billion Brexit borrowing bill means less money for public services, not more as we were promised.
“The Government must now do everything it can to safeguard jobs and investment, which means rejecting a hard and destructive Brexit.”
Notes to editors
The OBR’s analysis on the impact of Brexit on the economy can be seen here, on pages 19 and 20 (tables 1.4 and 1.5): http://cdn.budgetresponsibility.org.uk/ExecSummNov2016EFO.pdf
There will be a total £122bn increase in borrowing between 2016/17 and 2020/21. The OBR have isolated the impact on borrowing from the vote to leave the EU, which is £58.7 billion. (This is £226m a week).
Source: Table 1.4. p.19, http://cdn.budgetresponsibility.org.uk/ExecSummNov2016EFO.pdf
Key assumptions in the OBR forecast which show the decision to leave the EU is hitting the UK economy:
- OBR forecasts are based on trade with the EU and other countries slowing over the next ten years: ‘That the negotiation of new trading arrangements with the EU and others slows the pace of import and export growth for the next 10 years. We have calibrated this on the basis of a range of external studies of possible trade regimes.’ (p.9).
- OBR forecasts are based on the Government missing its central immigration target: ‘That the UK adopts a tighter migration regime than that currently in place, but not sufficiently tight to reduce net inward migration to the desired ‘tens of thousands’.’ (p.9)
- The referendum result has led to investment forecasters being reduced, which also reduces productivity: ‘The referendum result and forthcoming post-Article 50 negotiations have generated uncertainty for firms that will lead to some investment being postponed or cancelled. We have revised business investment down relative to our March forecast in all years, which also reduces trend productivity growth due to slower capital deepening.’ (p.9).
- The fall in Sterling that followed the referendum result has led to an increase in consumer prices: ‘The fall in the pound will squeeze households’ real incomes by pushing up import prices. We expect the pound’s fall to add almost 2 per cent to the level of consumer prices over the next two years, relative to our March assumption. Real earnings growth will consequently fall close to zero next year.’ (p.9).