The Price of a 'No deal' Brexit

The scumbag 'nasty party' promised us 'milk & honey' after Brexit - lying bastards !!! - this is what it really means !!!


Here’s what Brexit will mean for your wages, benefits and taxes
Analysis: Economists tell us Brexit will have a substantial economic impact on our lives. But how would ordinary people experience them? Ben Chu looks at the possible impact on wages, benefits and taxes.

Ben Chu
Economics Editor
@Benchu_
32 minutes ago


A 4 per cent of GDP loss from leaving with a trade deal accounts for £80bn in today’s money, or around £3,000 for each of the UK’s 28 million households

(REUTERS)
On 31 December the post-Brexit transition period ends and, with or without a free trade deal with the European Union, the UK will start life outside the EU’s single market and customs union.

That will, pretty much all economists tell us, have a substantial economic impact on our lives.

But what exactly will those impacts be – and how will ordinary people experience them?

Below we describe how the two varieties of Brexit are likely to impact peoples’ wages, benefits and taxes.

Deal

There are various ways of modelling the economic impact of the UK leaving the EU.

One is to analyse the likely overall economic impact on the UK economy of higher trade barriers with the EU, the bloc with which we currently do around half of our trade.

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Read more: Would a no-deal Brexit mean food shortages or price rises?

Virtually every macroeconomic trade model shows that leaving the EU with a free trade deal would hold back the UK economy’s growth relative to staying in the bloc.

The Office for Budget Responsibility, the Treasury’s own independent forecaster, this week estimated it would impede UK GDP growth over the next 15 or so years by around 4 per cent relative to where it otherwise would have been.

This picture would be roughly the same if we successfully concluded ambitious trade deals with the likes of countries such as the US, Australia and New Zealand.

The Government’s own economic modelling team estimates all these deals combined would add a maximum of 0.2 per cent of GDP in the long run.

This 4 per cent of GDP loss accounts for £80bn in today’s money, or around £3,000 for each of the UK’s 28 million households. This could be experienced in the form of lower wages, lower benefits and higher taxes than otherwise would have accrued to households.

£3,000
A rough indication of the size of the economic pain that would be borne by the average household from leaving the EU with a Brexit deal

It’s impossible to say exactly how much individual households would suffer financially, because this will depend on which sectors of the economy members of a household work in and the decisions of future politicians about redistribution through benefits and taxes.

But this £3,000 figure gives a rough indication of the size of the economic pain that would be borne by the average household

Another way to model Brexit is to examine different sectors such as agriculture, finance, fishing, manufacturing and so on.

These exercises show that some sectors, specifically those that do a great deal more in trade with the Continent than others, would face more damage.

Read more: What will happen to the UK after Brexit - deal or no deal?

Modelling suggests clothing, chemicals, pharmaceuticals, motor manufacturing, agriculture and financial services would be hit the most.

This implies that workers in those industries would likely face a more severe economic hit. But firms in sectors that don’t trade much with Europe, such as construction, might well be relatively unaffected.

However, it’s important to stress that such sectors could also be negatively impacted by future restrictions on EU migration, which would have implications for the wages of those who currently work in them.

No deal

Leaving the EU without a trade deal on 31 December would, according to the UK’s independent Office for Budget Responsibility (OBR), hold back UK GDP growth by around 2 per cent in 2021, or £40bn.

That translates into a loss of £1,500 per UK household. And over 15 years the OBR estimates, based on the modelling done by a host of independent researchers, that the damage would hit 6 per cent of GDP, or around £120bn, or around £4,000 per household.

Again, it’s impossible to say precisely which households would suffer because this would depend on which sectors people work in and the decisions of future politicians about benefits and taxes.

Yet this is a rough indication of the size of the economic pain that would be borne – in some way - by the average UK household.

The impact of a no-deal Brexit on particular sectors would be even more unequally felt than leaving the EU with a free trade deal. Many exporting firms would face EU tariffs, which would make those exports less competitive and likely reduce demand for them, blowing a hole in the incomes of people working in these sectors.

Read more: What are the remaining issues blocking a Brexit deal?

The impact on the automotive sector would be especially severe because all cars exported to the EU ( the destination of half of UK-manufactured cars), would be hit by a 10 per cent tariff.

The OBR thinks unemployment would rise by around 300,000 next year, relative to otherwise, if we left the EU without a free trade deal. It’s likely that these lost jobs would be concentrated in those sectors which are heavily reliant on EU trade.

Researchers at the Institute for Fiscal Studies calculate that lower-skilled workers more likely to be hit economically by a no-deal Brexit.

“These tend to be older men with skills specific to their occupation who, history suggests, may struggle to find equally well-paid work if their current employment were to disappear,” they note.

 

Yet further evidence of the cost of Brexit !!!


No-deal Brexit economic fallout predicted to exceed that caused by coronavirus

PA
Dec 10th 2020 10:19AM
Collapsing the Brexit trade talks and leaving without a deal is forecast to wreak havoc on the UK economy.

If the UK decides to operate using World Trade Organisation (WTO) rules with the European Union, its largest trading partner, from January 1 2021, then official figures forecast that 2% will be wiped off the economy next year as a result.

Prime Minister Boris Johnson has often talked of how Britain can prosper under an "Australia" style relationship with Brussels – Downing Street shorthand for no-deal.

£45 billion
How much could be wiped off the UK economy if a no-deal Brexit causes GDP to drop by 2% in 2021
Investec
But finance chiefs disagree, warning of long-term economic damage that would eclipse even that caused by coronavirus.

In stark comments last month, Bank of England governor Andrew Bailey told MPs on the Treasury Select Committee: "I think the long-term effect would be larger than the long-term effect of Covid.

"The models would suggest that the effects of a WTO no-deal trade agreement are longer term.

"The reason for that is that it takes a lot longer period of time for the real economy to adjust."


The Office for Budget Responsibility (OBR) has forecast that a no-deal scenario would lower gross domestic product (GDP) – the main marker of the health of the economy – by 2% in 2021, a drop that would come on top of the fiscal impact wrought by Covid-19.

Investec's chief economist, Philip Shaw, told the PA news agency that if the prediction proved correct, it would be equivalent to the economy sinking by £45 billion next year.

According to Chancellor Rishi Sunak, coronavirus is expected to leave "long-term scarring", meaning in 2025, the economy will be around 3% smaller than expected in the March Budget, even before the effects of no-deal are felt.

In analysis published to coincide with November's Spending Review, the OBR said the economic shock of the "various temporary disruptions to cross-border trade and the knock-on impacts" caused if there was a no-deal outcome would continue for years to come.

The UK fiscal watchdog said: "As these abate, the longer-term effects of lower trade intensity continue to build such that output is 1.5% lower than our central forecast after five years, and 2% lower in the long run."

Employment would also suffer in the event of a no-deal outcome, it suggested.

The OBR forecasted that unemployment will peak at 8.3% in the third quarter of 2021 if there is no agreement – 0.9% higher than in its central forecast for the quarter.

And it is those sectors that have proved resilient during the pandemic that would face the hardest hammering, it added.

In an evidence session before MPs earlier this month, OBR chairman Richard Hughes said a failure to agree an EU trade deal would hit firms that are helping the economy through the coronavirus crisis – such as manufacturers, financial services and agriculture.

It would lead to further job losses and an additional impact to UK activity at a time when the economy is already facing the biggest plunge in output for more than 300 years, he warned.

The OBR is predicting the economy will plummet by 11.3% in 2020 – the largest annual fall since 1709, the year of the Great Frost, and the worst performance of any of the group of seven advanced economies, according to the Organisation for Economic Cooperation and Development.

In a hearing with the Treasury Select Committee, Mr Hughes said: "Covid affects the non-tradeable sectors of the economy, whereas Brexit affects the tradeable goods sectors."

He added: "Were we to leave the EU without a deal, these are the sectors that would be hit hardest by the fact they lose access to a very important market to them, which is the EU."