UK worse off under almost all Brexit scenarios, says US thinktank
WTO model would cost economy £105bn over 10 years
Britain would lose 4.9% of its GDP over a decade at a cost of £105bn if it left the European Union without a deal and operated under World Trade Organisation rules, according to the US Rand Corporation thinktank.
In a report outlining the impact of eight different scenarios, only one option, a potential trilateral UK-US-EU free trade deal, would do least harm to the British economy.
The EU would also lose out under the WTO scenario, but the effect would be a “relatively minor" 0.7% fall in GDP.
The trilateral option would see UK GDP 2.2% higher than under the WTO rules scenario, Rand said, with the UK slightly better off than under continued EU membership.
The EU and US would make significant economic gains under this trade scenario. However, Rand also found that such an arrangement is generally considered very unlikely “in the current political environment on both sides of the Atlantic”.
Rand added that the two-year negotiating deadline “puts the UK in a weaker position”.
“If there is no resolution by March 2019 and no agreement by the EU27 to continue talks, a suspension or ending of the negotiations would harm the UK much mo2re than the EU,” the report states.
“A transition period may provide more flexibility for both parties, but would also come with some domestic cost in the UK if it prolongs free movement of EU citizens and European Court of Justice jurisdiction – and in any case a transition agreement may be almost as difficult to negotiate as the final arrangement.”
The report also warned that any benefits of Brexit in terms of regulatory reform could take at least 12 years to filter through.
A no-deal Brexit would also strain UK public finances enough to threaten existing British defence spending commitments, and impact on US defence contractors bidding for work.