IEA - Leaked Brexit analysis fails to break new ground

1 Feb 2018 09:12 AM

Commenting on Whitehall’s leaked Brexit analysis, Julian Jessop, Chief Economist and Head of the Brexit Unit at the Institute of Economic Affairs said:

“This latest analysis of the economic impact of Brexit would have to be published and critically reviewed before it could be taken seriously. But the leaks add very little to the debate and settle nothing at all.

“The report does at least appear to take account of some of the potential benefits of Brexit, such as the scope to do independent trade deals. This is a step in the right direction. It also presumably explains why the estimated long-term impacts on GDP are slightly smaller than those in the Treasury’s infamous report published shortly before the referendum.

“However, this analysis only looks at three ‘off the shelf’ options – essentially ‘Norway’, ‘Canada’ or ‘WTO rules’ – rather than the bespoke deal that the UK government is seeking. It therefore does not allow for the possibility of a streamlined customs agreement or a deal that covers financial services.

“The report also relies heavily on the same ‘gravity models’ of global trade, which many economists question. Plus, the WTO (or ‘no deal’) scenario appears to assume that the UK maintains a level playing field by imposing tariffs on imports from the EU, when in reality it could also do so by reducing tariffs on imports from the rest of the world.

“Overall, this report is not the game-changer that some would have us believe. It can be chucked on the same pile as the many previous studies that have used much the same assumptions and models to come up with much the same results.”

Notes to editors: 

For media enquiries please contact Nerissa Chesterfield, Communications Officer: nchesterfield@iea.org.uk or 0207 799 8920 or 07791 290 268.

To read more from the IEA’s Brexit Unit, click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.

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