GDP to be 4% lower in the longer term than it would have been had the UK stayed in the EU, new NIESR report reveals

26 November 2018

A new NIESR report estimates that if the government’s proposed Brexit deal is implemented, then GDP in the longer term will be around 4 per cent lower than it would have been had the UK stayed in the EU.

The report, ‘The Economic Effects of the Government’s proposed Brexit Deal’, focuses on how the government’s proposed Brexit deal is likely to affect the economy. Main points include:

• If the government’s proposed Brexit deal is implemented, then GDP in the longer term will be around 4 per cent lower than it would have been had the UK stayed in the EU. This is roughly equivalent to losing the annual output of Wales or the output of the financial services industry in London. This is equivalent to a loss of 3 per cent in GDP per head, worth around £1,000 per person per annum to people in the UK.
• If the UK were to stay in a customs union with the EU, or if the Irish backstop position was to be invoked, there would still be a hit to GDP per capita of 2 per cent.
• Even if the deal is implemented, there will continue to be uncertainty about the precise shape of the future relationship beyond the transition period ending on 31 December 2020. Recent estimates, based on the UK’s performance relative to other similar economies, suggest that Brexit uncertainty has already reduced UK GDP by about 2 per cent relative to what it would have been if the UK had stayed in the EU. This uncertainty is a consequence of the 2016 referendum result.

The estimates presented represent the Institute’s considered view of the economic impact of the government’s proposed Brexit deal, but they are themselves uncertain as there is no historical precedent of a country leaving a major trading block such as the EU.

Full report

© NIESR