Getting Brexit done? It’s already cost UK economy almost £70bn, new report says

Brexit has already cost the UK economy almost £70bn – the equivalent of £440m a week or £840 for every household in the country each year – according to a new report from the Centre for European Reform released today.

And as Boris Johnson made new concessions to Brussels in the hope of securing a withdrawal agreement, a respected think tank warned that even if a deal is reached, the uncertainty and disruption of Brexit can be expected to drag on to the middle of the 2020s or beyond, with the danger of multiple no-deal cliff-edges along the way.

Despite the prime minister’s claim that “getting Brexit done” this month will allow him to focus on domestic priorities like the NHS and crime, the Institute for Government’s Brexit programme director said that EU withdrawal can be expected to soak up the government’s “political capital and time and energy” for years to come.

With Mr Johnson’s “do or die” Halloween deadline just 15 days away, People’s Vote campaigners are now calling on voters in their hundreds of thousands to join the Together for The Final Say march in London on Saturday to demand a confirmatory referendum on any deal.

As campaigners predicted Saturday’s march and rally will be one of the biggest demonstrations in UK political history, former attorney general Dominic Grieve told The Independent the prospect of the British people being given the final say on Brexit was now “tantalisingly close”.

“This coming week will surely be some of the most important in the post-war history of parliament,” said Mr Grieve. “The prime minister will either be trying to force an unknown deal or no deal through, but MPs from across the house, of all parties and none, will press the case for a confirmatory ballot.

“We are now tantalisingly close to giving the final say on Brexit back to the people and it will be vital for everyone who supports our cause to make themselves heard on Saturday and in the days that follow.”

Liberal Democrats have tabled an amendment to the Queen’s Speech demanding a People’s Vote, and MPs are also expected to hijack Saturday’s emergency sitting of the House of Commons to force a vote on a second referendum as marchers mass for a rally outside in Parliament Square.

And the continuing threat of a no-deal exit at the end of this month sparked warnings from the Police Service of Northern Ireland of a possible upsurge in terror and from the Bank of England of job losses and business closures if the prime minister fails to secure agreement in last-ditch talks.

A new report from the Centre for European Reform think tank, obtained by The Independent, found that the UK economy was 2.9 per cent smaller three years after the June 2016 Brexit referendum than it would have been if Britain had voted to Remain.

The GDP shortfall equates to around £23bn a year in lost growth – significantly more than the £350m weekly payment to Brussels claimed during the Vote Leave campaign by Boris Johnson in comments branded “misleading” by the official statistician.

And the CER said that the gap – calculated by comparing the UK’s actual performance with those of comparable countries – had grown over the three months to June this year as Britain’s economy shrank by 0.2 per cent while others continued to grow.

The CER analysis found that the contributions of consumption, investment and trade to UK GDP were all lower by the middle of this year than would have been the case after a Remain vote.

And the think tank’s deputy director John Springford said that while there would be some beneficial impact on consumer confidence and the value of sterling from a deal, the UK economy would still experience a permanent loss of growth due to the increased barriers to trade with its closest neighbours which are an inevitable part of Brexit.

open image in gallery

Mr Springford said: “If Britain and the EU sign a deal in the next two weeks and the UK enters the transition phase, growth may rebound a little.

“But uncertainty over the future relationship with the EU will continue to weigh on growth.”

The Institute for Government’s Brexit programme director Joe Owen told The Independent that the withdrawal agreement currently being negotiated with Brussels represents only a “tiny subset” of the issues which must be settled for the UK to finalise its future relationship with the EU, including trade, security and broader cooperation.

Experience from previous deals suggest it will be “impossible” for Mr Johnson to negotiate, ratify and implement a “best-in-class free trade agreement” of the kind he says he wants with Europe by the end of the proposed transition period in December 2020, said Mr Owen.

With a new European Commission taking office on 1 November and likely to be preoccupied with the EU’s multi-year budget as it draws up a new mandate for talks with the UK on future relations, it was highly likely that Britain will have to take up the option of a further two-year extension to December 2022.

And even with this breathing space, it would be “extremely impressive and surprising, based on international standards, if they were to agree a best-in-class free trade agreement in the three years available in the extended transition period”, said Mr Owen, who said that the proposed agreement would be “much more contentious” than most FTAs because it involves breaking up trade links rather than forging them.

open image in gallery

Even if an FTA could be sealed in significantly less than the five-to-eight-year timespan typically required, businesses and government departments would then need time to prepare for entirely new arrangements for customs and immigration – processes normally undertaken over a decade or more – he said.

“It’s very possible that these big questions will still be going round and round by the middle of the 2020s, if not beyond,” said Mr Owen “This is going to dominate government for years and years to come.”

If a withdrawal agreement is reached this month, “it’s hard to see how official civil service activity dies down significantly and it’s hard to see how the new negotiation is less contentious and doesn’t soak up just as much political capital and time and energy,” he said.

Agreement this month will not end the threat of no deal, meaning British businesses will face repeated periods of uncertainty about the potential for a sudden change in trading arrangements, he warned.

The UK will face another crunch point in June 2020, when it is likely to have to ask for an extension to negotiation at a time when the EU will be able to exert maximum leverage over future access to UK fishing waters and equivalence for financial services regulations.

And if a future partnership deal is finally achieved, it has to be ratified not only by Westminster and the European parliament but by national and regional assemblies across the continent, with the risk that a single veto could crash the agreement and force the UK once more to extend negotiations or revert to unfavourable World Trade Organisation terms.

As campaigners prepare for Saturday’s march, Liberal Democrat leader Jo Swinson, Labour’s London mayor Sadiq Khan, Joanna Cherry – the Scottish National Party MP who challenged the government in the courts over prorogation – Green MP Caroline Lucas, Labour’s David Lammy, Plaid Cymru Westminster leader Liz Saville Roberts and Change UK leader Anna Soubry were all confirmed as speakers for the rally outside parliament.

Announcing her party’s proposed amendment to Mr Johnson’s Queen’s Speech, Ms Swinson said: “The best deal we have is as members of the European Union and we want to give the people the chance to choose to stop Brexit.”

Mr Johnson is required by law to request an extension to Brexit negotiations unless he has secured parliamentary approval for a deal by Saturday.

But the author of the law, Commons Brexit Committee chair Hilary Benn, said it was also vital to ensure that any deal is subjected to public approval in a confirmatory referendum.

“Saturday is the day when the Safeguard Act comes into force,” said Mr Benn. “If the prime minister hasn’t by then succeeded in reaching a deal with the EU that parliament has approved then he will have to obey the law and seek an extension to the Brexit deadline.

“But if a deal is put before parliament, then the next few days will be vital in seeking to ensure that it goes back to the people in a confirmatory referendum with Remain on the ballot paper.

“Now is the time for everyone to let their MP know just how much support there is for a Final Say referendum so that the British people can decide what happens.”

The Centre for European Reform report can be read at https://www.cer.eu/insights/cost-brexit-june-2019