Two official reports on Brexit – by the Bank of England and the UK Government – warn a no-deal departure from the EU could produce one of the worst recessions in British history.
Many of those who voted for Brexit did so because they were unhappy with their lot and blamed competition from EU migrants for depressing rates of pay. Reducing the supply of workers, while demand remained the same, would surely boost everyone’s pay packet – or so the argument went.
But two reports yesterday – by the Bank of England and the UK Government itself – spelt out the folly of that apparently simple economic theory and, indeed, the folly of Brexit itself, which is shaping up to be one of the greatest deliberate mistakes by any nation at any time in history. The UK is one of the world’s wealthiest countries and, as a member of the European Union, had transformed its economy over the last five decades, until it was hit by the devastating blow of the 2008 financial crash.
That unwelcome bolt from the blue stemmed from overly complicated financial schemes that too few people genuinely understood but which were making banks too much money to prompt sufficient scrutiny of the potential dangers. A decade of austerity ensued. But now the UK risks deliberately plunging itself into an even worse recession.
If, as seems likely, MPs reject Theresa May’s proposed Brexit deal with the EU, then Britain will be heading towards a chaotic no-deal Brexit.
According to the Government’s new report, that could mean a fall in the UK’s gross domestic product (GDP) of 6.3 to nine per cent – if our departure from the EU has no effect on immigration. It gets even worse if Brexit cuts the net flow of EU workers into Britain to zero: under that scenario, GDP would plunge by between eight and 10.7 per cent.
The Bank’s analysis was only slightly less bleak: a no-deal Brexit without a transition period could see the UK’s GDP slashed by about eight per cent, unemployment rise 7.5 per cent, house prices fall 30 per cent, and the pound’s value slump by a quarter.
Even if MPs approve May’s Brexit deal or somehow manage to negotiate a better one with the EU, every Brexit scenario leaves the UK worse off than it is as an EU member. Brexiteer David Davis dismissed the “flawed assumptions” behind such forecasts, but blithely ignored his own. The rationale behind Brexit has evaporated and yet, still, our politicians press on. If May’s plan – perhaps the best of a bad lot – fails, swift action will be needed to avert catastrophe.