Today, the Exiting the European Union Committee published the Government’s secret Brexit impact analysis. The document, entitled ‘EU Exit Analysis: Cross-Whitehall Briefing’, outlines different Brexit scenarios and their likely economic impact. This briefing outlines Open Britain’s view of the document, and summarises some of the new facts that emerge from the document.
- It is little wonder the Government have fought tooth and nail to keep this analysis secret. It shows that the Prime Minister is pursuing a policy that she knows will severely damage our economy.
- All the Government’s Brexit scenarios have one thing in common: we will all be worse off if Brexit takes place. Leaving the Single Market means the Government will need to find an additional £55bn in borrowing by 2033.
- The secret analysis shows that new free trade agreements will not come close to compensating for the costs of leaving the EU. Overall, new trade deals could add between just 0.2% and 0.7% to UK GDP, compared to a 5% hit from leaving the Single Market.
- When the secret Government analysis talks about the “opportunities” of regulating differently, they mean cutting workers’ and consumer rights and lowering environmental and food standards in a desperate pursuit of new trade deals.
- Today’s analysis shows that the ridiculous claims made by leading Brextremists that we could save our economy from the worst impacts of a hard Brexit by simply removing all tariffs is a dangerous fantasy.
- The Government’s own assessment shows that an FTA style agreement, like that which the UK Government is trying to achieve, could see financial sector firms leaving the UK and that London could lose its status as a financial services centre.
- With the costs and risks of Brexit becoming clearer all the time, we are all entitled to keep an open mind about whether Brexit is the right choice for our country.
- The secret analysis shows the UK will need to borrow an additional £55bn by 2033-34 if we leave the Single Market and instead negotiate a free trade agreement with the EU.
- On page 25, the Government calculates that the £28bn reduction in borrowing that would result from, among other things, ending EU budget contributions, would be more than offset by the £83bn additional borrowing that would be required. Additional net borrowing under this scenario would be £55bn.
- Open Britain’s view: This shows the Prime Minister is pursuing a policy that she knows will severely damage our economy.
Threat to workers’ and environmental protections
- Page 15 of the secret analysis includes a section discussing how Brexit creates an “opportunity to regulate differently.”
- This section includes a discussion of different reports detailing possible policy changes in “areas of high sensitivity, like employment, consumer protection and environment”.
- It says BEIS is “coordinating analysis” of the costs of the 48 hour working week, which is protected by the Working Time Directive. Theresa May has repeatedly refused to rule out scrapping the Working Time Directive after Brexit.
- Open Britain’s view: This is another glimpse of the future if the Brextremists have their way. Make no mistake: when the secret Government analysis talks about the “opportunities” of regulating differently, they mean cutting protections for workers, consumers and the environment.
Minimal benefit from new free trade deals
- Page 14 of the secret analysis shows that new free trade agreements will add just 0.2% and 0.7% to UK GDP, compared to a 5% hit from leaving the Single Market.
- The long-term benefits of a free trade deal with the US are said to be between 0.1% - 0.3%. This is despite the repeated claims by ministers that a free trade deal with the US is the great prize of Brexit.
- Open Britain’s view: Free trade agreements will take years to negotiate and will involve huge compromises, many of which the British public are unlikely to support. This analysis is effectively an admission by the Government that it has massively overstated the economic benefits of free trade agreements in order to justify taking us out of the Customs Union.
Costs of unilateral free trade
- Page 14 of the secret analysis shows that if Britain were to leave the EU with no deal and then unilaterally drop its import tariffs to zero, it could only expect to mitigate the costs of trading on WTO rules by around 0.2% to GDP.
- This barely makes a dent in 7.7% hit to our GDP by 2033 that the Government predicts will happen if we fall back on WTO terms.
- Open Britain’s view: This revelation flies in the face of the ridiculous claims made by leading Brextremists that we could save our economy from the worst impacts of a hard Brexit by simply removing all tariffs. This must the final nail in the coffin for the argument in favour of unilateral tariff reduction.
Impact of Brexit on the services sector
- Page 9 of the secret analysis shows that according to the very latest HMG analysis, the costs of non-tariff barriers costs could hit exporters of UK services into the EU27 by up to 20% in a future UK-EU trading relationship.
- Under the kind of FTA which the Government is seeking to get with the EU, the gross-value added to the UK economy would decrease by 5% in the financial services sector, by between 5-6% for the business sector and by over 6% for the retail and wholesale trade sector.
- As concerns Professional and Business Services, according to the Government’s own secret analysis “existing FTAs such as CETA do not remove over 550 individual restrictions on services trade.” An FTA based on CETA is the kind of deal which is on offer to the UK from the EU27.
- As concerns financial services, under an FTA style scenario (as the Government is looking to negotiate) “market access would be hampered” and “would prohibit firms from providing regulated financial services to the EU” and that current EU equivalency rules “would lead to firms relocating substantial amounts of activity from the UK to the EU” and that “London’s status as a financial centre could be severely eroded.”
- Open Britain’s view: The service sector, the crown jewel of this country’s economy, will take an almighty hit by the Government’s very own analysis due to Brexit. If UK services cannot access the Single Market, they may even look to leave the UK. The secret analysis, once again highlights that leaving the Single Market is a terrible idea and that the Government should drop this as a red line in the negotiations now.