No-deal Brexit could cost UK economy 9.3% of GDP over 15 years - govt

A cross-departmental analysis found leaving the EU will leave Britain poorer than it would have been had it remained inside the bloc.

Brexit. Picture: Facebook.

LONDON - If Britain crashes out of the European Union (EU) without a deal its economy could end up being 9.3% smaller in 15 years' time than would otherwise be the case, the government said on Wednesday.

A cross-departmental analysis found leaving the EU will leave Britain poorer than it would have been had it remained inside the bloc, even accounting for new trade deals it would eventually be able to sign.

It did not exactly model for the deal struck by Prime Minister Theresa May with the EU last week, the outlines of which remain vague, but suggests something similar could see the economy shrink by as much as 3.9%.

The 83-page report was published a fortnight before British MPs vote on the deal, with many deeply opposed.

The Brexit deal comprises a divorce agreement and a political declaration on future ties, which offers a "spectrum" of options for how Britain will trade with the EU after Brexit, the report said.

Given this range of options, the economic analysis offered two different models on what the final deal could look like, and assessed how they could affect the economy when combined with the government's hopes of ending free moment of EU workers into Britain.

If Britain got the frictionless trade it wants, as outlined in a government plan in July, and there was no change to migration arrangements, the economy would still shrink by 0.6% compared to what it would be otherwise.

If Britain did get frictionless trade and net EEA migration fell to zero, the economy would shrink by 2.5%.

But many believe Britain will not get everything it wants, and the analysis models a trade arrangement halfway between frictionless trade and a standard free trade agreement.

This compromise model with no change to migration would see the economy shrink by 2.1%. With zero net migration, it would shrink by 3.9%.

The document makes clear the paper is not an economic forecast for the UK economy, adding that the results "should be interpreted with caution".

The models also do not take into account changes such as demography or productivity levels, or any changes to EU rules in future.

They do however assume Britain rolls over the trade deals it currently benefits from as part of the EU and strikes new ones with countries including the United States.

But the impact of these trade deals is negligible, and an increase of between 0.1 and 0.2% in GDP compared to today's arrangements.