Business leaders back May's Brexit deal, despite £100bn cost estimate
City leaders are backing Theresa May’s Brexit deal due to concerns regarding the impact of a no-deal scenario, even though the divorce was calculated to leave UK citizens £1,000 poorer than remaining in the European Union.
On Sunday, May's Brexit deal was signed off at a summit of European Union leaders in Brussels.
Although the deal still faces days of debate and a vote in Westminster, initial research by the National Institute for Economic and Social Research published on Monday estimated that the deal could cost the UK around £100bn a year by 2030 in reduced trade and income, the equivalent of cutting the UK’s GDP by about £1,000 per person.
The implementation of the government’s proposed Brexit deal means the UK would leave the EU customs union and single market in 2021, which NIESR calculated would mean UK GDP would be around 4% lower by 2030 GDP than it would have been had the country stayed in the EU.
NIESR said that GDP would be trimmed by higher impediments to services trade, the independent research institute explained, which would make it less attractive to sell services from the UK and therefore discourage investment in the UK.
Nevertheless, executives in the City of London urged parliament to vote for May’s deal in order to avoid a no-deal Brexit, which is seen as the worst case scenario for British business and would cost the UK economy £140bn a year by 2030, according to NIESR's calculations.
Miles Celic, boss at TheCityUK, the lobbying body for the financial services industry, felt there was a "straight choice" between May's deal and a no-deal Brexit.
“The focus must now be on securing the withdrawal agreement and the transition period it brings – which is critical for our industry and many others. There is much still to be negotiated to define the future relationship. The sooner that can get started, the better,” Celic said.
In a Monday afternoon speech following the EU Summit: The Prime Minister is expected urge MPs to support the agreement by saying on Monday: “We can back this deal, deliver on the vote of the referendum and move on to building a brighter future of opportunity and prosperity for all our people.
“Or this house can choose to reject this deal and go back to square one. It would open the door to more division and more uncertainty, with all the risks that will entail.”
Despite the agreement reducing the negative impact of Brexit on business, the NIESR also found that even with the deal, total trade between the UK and the EU will fall by 46% and tax revenue will fall by 1.5% – 2%.
Leaders from the European Union backed the UK’s Brexit deal on Sunday but the agreement still needs to be passed by the British parliament. May warned on Monday that if MP’s voted against the deal, Britain would be “back in square one”.
The PM and her Brexit deal still face opposition from all sides and Foreign Secretary, Jeremy Hunt admitted on Sunday that getting the deal approved by the Commons looked “challenging”.
Labour leader Jeremy Corbyn said: “This is a bad deal for the country. It is the result of a miserable failure of negotiation that leaves us with the worst of all worlds. It gives us less say over our future, and puts jobs and living standards at risk. That is why Labour will oppose this deal in parliament.”
May is set on publishing models of Brexit, outlining the impact of each of them on Wednesday. This could further anger opposing members of her own party who believe the reports fuel the "project fear" movement against the divorce but especially the Northern Irish Democratic Unionist Party, which could be infuriated by any analysis that treats Northern Ireland separately from the mainland.
NIESR's report was prepared for the People’s Vote campaign.