Economic Impact of May’s Deal and a “No Deal” Scenario

On January 15, the British Parliament will vote on Theresa May’s Brexit deal. Most MPs seem to see a clear defeat for Theresa’s motion. But what is the economic impact?

The LSE Centre for Economic Performance in association with “The UK in a  Challenging Europe” has modelled both scenarios (“Theresa’s Deal” and “No Deal”) and examined the consequences. The modelling suggests that the current Brexit deal could reduce UK’s GDP per capita by between 1.9% and 5.5% in 10 years time compared to a remain option. In a “No Deal” scenario, UK’s GDP per capita is reduced by 3.5% to 8.7% compared to the baseline of remaining as an EU member.

The IMF has forecast a scenario in which a “No Deal” Scenario and a “Remain” Scenario will show a drop of about 6%. The UK Treasury’s modelling suggests the UK GDP will decline by 2– 4% over next 15 years. In a no-deal Brexit, the UK economy could shrink by 9.3%.

Consequences of this (Brexit), is the cost to public finance, domestic consumption, and decline in private investment. Leading Brexiters are unwilling to discuss what price is worth paying in order that UK leave the EU. It is fine to say economics is not the most important consideration. But what is not acceptable is to deny that there will be any damage at all.