‘Just about any Brexit will damage UK economy’

25 Jun 19

A think-tank has warned most forms of Brexit will damage the UK economy - while the Office for National Statistics has predicted borrowing will increase this financial year. 

A report from the think-tank UK in a Changing Europe has said that “most forms of Brexit will worsen the government’s fiscal position, probably significantly” and added that this will impact on policy initiatives and the timing of the Spending Review.

The study predicted that economic damage would disproportionately hit those in the country who are already worse off.

“The impacts of Brexit on regions and sectors are, if anything, likely to disadvantage those which are already lagging behind,” it said.

A sharp fall in sterling has pushed up prices without doing much to boost exports, and uncertainty has reduced business investment in the UK, the report added.

It claimed that even if the UK were to “reverse course and remain in the EU” there would still be lasting damage to our international reputation for political and economic stability.

“Looking forward, it is less a question of whether Brexit will be damaging economically, but the extent of the damage, with a no-deal exit posing particular risks,” the report said.

Anand Menon, director of the think-tank and professor at King’s College London, said: “No-one could claim that progress so far has been an unmitigated success – but it’s up to politicians to make it a success in future.”

Professor Jonathan Portes, also of King’s College London and a senior fellow of UK in a Changing Europe, said: “Many hoped that Brexit would be a ‘reset moment’ that would force the British political system to address long-neglected structural issues, both economic and social. So far, that opportunity has been missed whether that can change will determine the long-run success of Brexit.”

The report compounds projections from the ONS from Friday, which suggested borrowing could increase to £29.3bn in the financial year ending March 2020 – up from £24bn in the year ending March 2019.

ONS figures also showed that borrowing grew to £5.1bn in May 2019 - £1bn more than in May 2018, though this figure is still the lowest for that month since 2002.

The deficit in the current financial year to date (April 2019 to May 2019) was £11.9bn, £1.8bn more than in the same period last year.

Howard Archer, chief economic advisor to the EY Item Club, said it was “not the best news on the public finances”, due to year-on-year deterioration.

“Much will depend on Brexit developments and how the economy reacts,” he added.

Chancellor Phillip Hammond warned last week that a no-deal Brexit would wash away the Treasury’s fiscal headroom and future public spending plans.

Did you enjoy this article?