How much and for how long will our economy be affected by Exit?
What will be the cost to us of generating growth outside the EU?
Will our trade with the EU and the weakness of the £ recover from the shock of Exit?
Martin Lewis has written an excellent article on his blog where he says: “Anyone who tells you they know what will happen if we leave the EU is lying. Predicting exact numbers for economic, immigration, or house price change is nonsense”.
George Box said: “All models are wrong but some are useful”. In this context it is difficult to find which ones are useful.
What goes into a forecast governs what comes out and the assumptions behind the Government’s model have been based on past EU trade agreements that are not entirely relevant to us. Therefore although it is apparently arithmetically rigorous we wonder whether it is a good balance between the intellect and reality.
It seems to be generally accepted that the short term effects of the uncertainty following Exit will be painful.
“If we take as a central assumption that the UK would seek a negotiated bilateral agreement, like Canada has, the costs to Britain are clear. Based on the Treasury’s estimates, our GDP would be 6.2% lower, families would be £4,300 worse off and our tax receipts would face an annual £36 billion black hole.”
The Comment “worse off” is applying to the level of GDP of the UK and it assumes no change in the number of households. It is not the same as income nor is it a measure of a family’s wealth.
Although the calculations are regarded as being very accurate, we do have some fundamental problems with a forecast for the next 15 years. If you think what has happened at any time in the last 15 years, it would not take much to totally undo many assumptions.
In the short term it seems to be agreed that the uncertainty of the terms of exit will not be good for the £ or the economy. You can read their conclusions:
The numbers can come from various sources but here is a useful list:
Knoema has a very useful summary of several sources
The EU has its own forecasts
The OECD has worldwide forecasts
Economic Intelligence Unit is very thorough on the worldwide report
The Centre for European Reform analyses how the UK is intertwined with the EU
Global Counsel has done an interesting study of the other side: i.e. the effect on Europe of us leaving
Full Fact analysis of the difference between the economic forecasts