Chancellor reiterates warnings on no-deal economic impact

Chancellor reiterates warnings on no-deal economic impact

The Chancellor of the Exchequer has reiterated his warnings that Britain leaving the European Union without a deal would damage the economy.

In a letter to the Treasury select committee, Philip Hammond said the British economy would be between 5 and 10 per cent smaller in a "no-deal" scenario than it would otherwise have been.

Mr Hammond warned that the north east of England and Northern Ireland would see the largest negative effects of such a scenario.

Mr Hammond said this analysis is currently undergoing a "process of refinement" in the run-up to MPs voting on the deal which the government negotiates.

But he said: "We expect the analysis to show that for scenarios in which we have higher barriers to trade with the EU there will be a more damaging effect on the economy and public finances.

"These are conclusions that many other credible external organisations have come to independently, including the IMF, the OECD, the LSE and NIESR."

But Mr Hammond added none of the scenarios looked at by this analysis represented the government's preferred model for the relationship between the UK and the EU after Brexit, as set out in a recent white paper.

He said: "That proposal is ambitious in breadth and depth. It comprises a comprehensive package for services and digital, minimising new barriers to trade while giving the UK the freedom to chart its own path in the areas that matter most for its economy; while seeking to minimise barriers to trade in goods, both at and behind the border.

"It is expected that the economic and fiscal impacts of the white paper model will be substantially better than no deal, protecting jobs and livelihoods and supporting both the UK and EU’s commitments to no hard border between Northern Ireland and Ireland."

The analysis, which was published earlier this year, looked at three models: a free-trade agreement, a no-deal scenario and remaining part of the European Economic Area.

Nicky Morgan, the chairwoman of the Treasury select committee, said: "The Chancellor has not committed to producing an analysis of the short-term economic fallout of a ‘no deal’ Brexit.

"The committee will continue to press the Treasury for a robust and high-quality short- and long-term analyses of the economic consequences of Brexit so that Parliament can take properly informed decisions in the coming months."

Separately, the government has confirmed a no deal Brexit could have stark consequences for UK pensioners living abroad.

In a technical paper out yesterday (23 August) it said British expats may lose the ability to access existing insurance contracts, such as a life insurance and annuities, due to UK firms losing their rights to passport into the EEA.