Leaked Whitehall document reveals Brexit could slow UK growth by 8%

01 February 2018 Consultancy.uk 4 min. read
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A leaked government document has claimed that the UK economy will grow more slowly outside the European Union, no matter what manner of deal is struck with Brussels. According to a Civil Service analysis unofficially disclosed to the British press, growth over the coming 15 years could be as much as 8% lower than if the UK remained in the EU.

The Whitehall analysis reportedly examines the likely impact of different scenarios. According to various outlets, the leaked document, titled ‘EU Exit Analysis - Cross Whitehall Briefing’ was drawn up for the Department for Exiting the EU – a revelation that comes just weeks after MPs grilled the department’s Minister, David Davies, who claimed there was no detailed information to publish on Brexit, even though he had talked previously about the 58 studies existing “in excruciating detail”.

Now, this leaked document allegedly suggests almost every part of the economy would suffer, should Britain’s exit from the EU come to fruition next year. Government sources meanwhile denied that the UK will be worse off, and that while all scenarios featured in the paper assumed a new deal with the US, the report did not account for Government’s preferred bespoke trade deal option, and it does not attempt to anticipate the outcome of negotiations.Leaked Whitehall document reveals Brexit could slow UK growth by 8%Conservative MP and leave campaigner Iain Duncan Smith added, in an interview with the Today programme, that the paper should be taken "with a pinch of salt", due to his belief that to date, almost every single forecast on Brexit has been wrong. "It's an incomplete report... deliberately leaked because it gives a bad view," Smith said.

According to reports from the BBC, the Treasury contributed to the document, but sources have claimed it is part of a much wider range of work going on in Whitehall, stating, "An early draft of this next stage of analysis has looked at different off-the-shelf arrangements that currently exist as well as other external estimates.”

The paper is likely to sharpen the debate in cabinet as the least bad option appears to be to remain close to the EU. The document reportedly claims growth would be 5% lower if Britain negotiated a free trade deal, and if, on top of this, the UK were to continue to adhere to the rules of the single market, this would be reduced to 2%. Should the Government opt for a more radical severance of relations with the EU, however, the report suggests UK economic growth could be as much as 8% lower than current forecasts. This significant drop in economic prospects would occur in the years ahead, if the country left the remaining bloc of 27 with no deal, and reverted to World Trade Organisation rules – something which would likely see export tariffs hit UK trade, particularly in manufacturing, hard.

The dire forecast for the coming 15 years comes at a time when the UK’s economy is already plagued by sluggish growth, and is underperforming in terms of productivity. In 2016, the UK Chancellor Philip Hammond budgeted £26 billion in headroom from public finances, as the country prepared for a lengthy Brexit transition. However, a year later, that buffer was depleted by almost two-thirds, as the government’s fiscal watchdog, the OBR, concluded that its previous forecasts for growth had been too optimistic. The news followed a similar announcement from the International Monetary Fund in July that, due to "weaker-than-expected activity" in the first three months of the year, the UK economy would grow by 1.7%, compared to a previously anticipated 2%.

Stagnant wages have also led to anxiety surrounding potential growth. While employment figures have continued to fall to decades-long-lows, the bulk of UK employees have not seen their pay extended at the rate of inflation, and have subsequently begun scaling back on ‘luxury’ consumer spending. While high rates of economic tourism last year helped stave off the impact of this, as Brexit looms, and ease of access to the UK potentially decreases, this could be something that has a major impact on the country’s growth prospects in years to come.