Modelling the future: estimating the impact of Brexit
CBI economists review a wide range of data and analysis to explain what different Brexit scenarios might mean for the UK economy.
This analysis was produced in 2019, before the COVID-19 pandemic. Therefore, this overview does not necessarily reflect the impact of the pandemic and the fact that the UK will now be entering into a new relationship with the EU in January 2021 under very different economic circumstances.
Key findings:
As the uncertainty over leaving the EU intensifies, a number of institutions have released analyses of the impact that different forms of Brexit could have on the UK economy.
Regardless of the form that Brexit takes, all the studies find that leaving the EU would make the UK worse-off in the long term, with the risk of further short-term disruption.
The impact of “no deal” is found to be particularly negative, with GDP per head expected to be 3.5%-9% below baseline in the long-run, reinforcing the importance of avoiding this outcome.
All studies also model a “deal” scenario, with a number of different assumptions including tariffs, rules of origin and non-tariff barriers, particularly for services trade. The range of impacts depend crucially on whether more trade barriers lead to lower innovation and productivity growth.
Sectoral and regional analysis reveals that the chemicals and motor vehicles sectors would see the most negative hit in a “no deal” scenario, while the regional results showed that the North East, North West and West Midlands are the most exposed. Nevertheless, the impact of Brexit on the economy will ultimately depend on how policy and business responds.