Every way of quitting EU will hurt economy - Hammond
Treasury report estimates 1-2% GDP impact from May deal
No-deal Brexit estimated to be more than three times worse
The Chancellor of the Exchequer has said that every method of leaving the European Union will leave the UK worse off – including the deal struck by Prime Minister Theresa May.
Speaking ahead of the government’s official economic assessment of the deal, Philip Hammond told the BBC: “If you look at this purely from the economic point of view, there will be a cost to leaving the EU because there will be impediments to trade.”
He confirmed that the economy would be “slightly smaller” over the next 15 years under May’s Brexit day.
A new forecast from the Treasury, due to be published later on Wednesday, is expected to say that under May's deal, UK gross domestic product will be 1-2% lower in 15 years, making the UK around £40bn poorer, The Daily Telegraph reported, with a no-deal estimated to make the economy £150bn worse off.
But Hammond said May's deal would minimise the economic impact “while providing political benefits”, and insisted that the economy would continue to grow. “So this is a very modest impact on the overall size of the economy,” he said.
Hammond was speaking ahead of the publication of two key reports, due out on Wednesday, by the government and the Bank of England which will assess the economic impact of May’s Brexit deal.
With the chancellor admitting that frictionless trade with the EU is not guaranteed with May’s deal, trade union Unite called on businesses to stop backing the deal and call for a permanent customs union with tariff-free frictionless trade.
Unite assistant general secretary Tony Burke said: “The chancellor Philip Hammond has let the cat out of the bag by admitting there are no legally binding guarantees on frictionless trade leaving Theresa May’s assurances worthless.
“Industry should sit up and take note. Claims that Theresa May’s deal secures the frictionless trade on which UK jobs and investment depend are inaccurate. It is time employers woke up and stopped expending their goodwill on Theresa May’s vague promises and bad Brexit deal."
Two non-government reports published this week have already claimed May’s deal would reduce living standards compared to staying in the EU.
A report by a consortium of academics and think-tanks, published on Tuesday, said living standards could be hit by the equivalent of between £700 and £2,000 a year and leave the economy as much as 5.5% smaller by 2030. If there is no deal, the figure could raise to £3,000, said the group, which included King’s College London and the Institute for Fiscal Studies.
Meanwhile, on Monday the National Institute of Economic and Social Research published a report – commissioned by the People’s Vote, which is campaigning for a second referendum – that said people could see living standards affected by between £700 and £1,100 under the Prime Minister’s deal.