IFG - 'No deal' will lead to more upheaval than long-term economic projects suggest
Government and independent forecasts of the economic impacts of Brexit focus on the long-term effects and do not provide a guide to the immediate disruption from ‘no deal’, warns a new report by the Institute for Government.
This is one finding from Understanding the economic impact of Brexit, a new report that examines 14 studies on the long-term impacts of Brexit carried out by a range of organisations, from the UK and Dutch governments to the London School of Economics and city banks.
These forecasts project how the UK economy is likely to be affected by around 2030 because of Brexit. However, the report says long-term estimates are not a guide to what might happen immediately if there is a disruptive no deal Brexit. Long-term estimates are based on current economic interactions between the EU and other countries with which it does not have a free trade agreement, like the USA. But the USA has well-established systems in place to handle this relationship, as well as crucial side deals (covering, for example, aviation and data). But none of this would be in place immediately in the event of a disruptive no deal.
The report also highlights that it is differences in the assumptions used in economic models – rather than the models themselves – that drive the large variation in predictions of the long-term impact. For example, studies that conclude the impact will be more negative, such as those by Rabobank and the Treasury’s pre-referendum forecasts, assume that Brexit will lead to a large increase in trade barriers with the EU and a clampdown on migration, leading to a reduction in innovation and lower productivity growth.
The only study to predict a substantial gain, carried out by the Economists for Free Trade, assumes there would be no increase in trade barriers with the EU, a large reduction in trade barriers with non-EU countries and that the UK Government would make widespread changes to regulatory policy.
The report says it is ultimately the Government’s responsibility to bring clarity to the public debate around the long-term impacts of Brexit. It makes nine recommendations for information the Government must publish alongside its final assessment of the economic impact of the proposed Brexit deal, from regional and sector impacts to migration and regulatory policy, so that others can see what assumptions they are working off and judge whether these are reasonable.
Gemma Tetlow, Chief Economist at the Institute for Government, said:
“There has been too much heat and not enough light in the discussions of the possible economic impact of Brexit. Any estimates the Government produce if and when a deal has been reached should be scrutinised but this must be done on appropriate, rather than spurious, grounds. When the Government publishes its final analysis, it must make clear what assumptions it has made so that MPs and other observers can judge whether they are a reasonable central estimate.”
Notes to editors
Latest News from
Reward farmers who help fight climate and nature crisis, urges IPPR think tank13/05/2021 14:35:00
Now the UK has left the EU’s agricultural schemes, the government should seize the opportunity to transform farming to protect the environment and secure the livelihoods of farmers, according to a new IPPR report.
IEA - Nanny statists have “exploited” this pandemic, says new research13/05/2021 13:35:00
Governments are increasingly adopting higher sin taxes and more prohibitions, finds the 2021 Nanny State Index
IFS - Elective hospital admissions dropped by a third last year, while outpatient appointments and non-COVID emergency admissions each fell by a fifth13/05/2021 12:35:00
New analysis by the Institute for Fiscal Studies, Harvard University and Imperial College London shows there were 2.9 million fewer planned admissions, 1.2 million fewer non-COVID-19 emergency inpatient admissions and 17.1 million fewer outpatient appointments between March and December 2020 compared with the same period in 2019.
Policy needs to adjust following encouraging GDP data, says IEA expert13/05/2021 11:35:00
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, commented on the latest GDP and trade data from the Office for National Statistics
Queen's speech: IPPR reaction to ‘policy gulf’ on environment, planning, health and care agenda13/05/2021 10:35:00
Think tank welcomes some targets and commitments, but says bold action and clear policy must follow
Ill-considered ‘junk food’ ad ban “has to be binned”, says IEA expert13/05/2021 09:35:00
Christopher Snowdon, Head of Lifestyle Economics at free market think tank the Institute of Economic Affairs responded to renewed government plans to ban ‘junk food’ advertising
Adam Smith Inst - "Nutty nanny statism": Government plans to ban 'junk food' advertising online and after 9.00pm11/05/2021 16:35:00
The Adam Smith Institute’s Head of Research Matthew Lesh responded to the Government maintaining plans to ban so-called ‘junk food’ from online advertising and before 9.00pm on television
“Unlikely to supercharge economic growth”: IEA experts respond to Queen’s Speech11/05/2021 15:35:00
Mark Littlewood, Director General at free market think tank the Institute of Economic Affairs, commented on the Queen’s Speech
JRF - Queen’s Speech: Where is the Employment Bill for low-paid workers?11/05/2021 14:35:00
JRF responds to today's Queen's Speech
The apprenticeship levy should be scrapped completely, says IEA expert11/05/2021 13:35:00
Professor Len Shackleton, Editorial and Research Fellow at free market think tank the Institute of Economic Affairs, responded to the news that £1bn of apprenticeship levy funds has gone unspent in the nine months since last May