Friday, 9 February 2018

Brexit: Official forecasts suggest economies throughout UK will be hit

In World Economy News 09/02/2018

Parts of the UK that backed a Leave vote would face the heaviest hit as a result of Brexit, according to estimates by government officials.
The forecasts, seen by MPs, model the 15-year impact of the UK staying in the single market, doing a trade deal with the EU or leaving without a deal.
They suggest that in England, the North East and West Midlands would see the biggest slowdown in growth.
The government said the document did not represent its policy.
It added that the forecasts did not “consider the outcome we are seeking in the negotiations”.
And one Eurosceptic Tory MP said the figures were “complete nonsense”.
Following a leak of some of the information to Buzzfeed last week, and political pressure to release it, ministers agreed to allow MPs to see the reports on a confidential basis in the House of Commons library.
In each scenario, growth would be lower, by 2%, 5% and 8% respectively, than currently forecast over a 15-year period.
In north-east England growth would be 3% lower if the UK stayed in the single market, 11% under a trade deal and 16% with no trade deal compared with staying in the EU.
The research suggests London – which backed Remain – would fare the best, with reductions of 1%, 2% and 2.5% in each of the three scenarios.
Scotland’s estimated hit would be 2.5%, 6% and 9%. Wales would see reductions of 1.5%, 5.5% and 9.5%.
Brexit-backing Conservative MP Jacob Rees-Mogg has accused Treasury officials of “fiddling the figures” to make all options but staying in the EU look bad.
Whitehall trade union reacted angrily to this suggestion and government ministers have dismissed his allegation.
Government assessment of Brexit deals on economic growth over 15 years compared to current forecasts
Government regionSingle marketFree tradeNo deal
East Midlands-1.8%-5%-8.5%
Eastern-1.8%-5%-8%
London-1%-2%-3.5%
North-East-3%-11%-16%
North-West-2.5%-8%-12%
South-East-1.5%-4.5%-7.5%
South-West-1%-2%-5%
West Midlands-2.5%-8%-13%
Yorkshire and Humber-1.5%-5%-7%
Northern Ireland-2.5%-8%-12%
Scotland-2.5%-6%-9%
Wales-1.5%-5.5%-9.5%
UK-2%-5%-8%
The government has said the analysis is preliminary and crucially does not measure the impact of the UK’s preferred option of a bespoke and comprehensive trade agreement, covering goods and financial services.
A spokesman said: “As ministers clearly set out in the House, this is provisional internal analysis, part of a broad ongoing programme of analysis, and further work is in progress.
“We are seeking an unprecedented, comprehensive and ambitious economic partnership – one that works for all parts of the UK. We are not expecting a no-deal scenario.”
The research suggests that the option of staying in the single market and customs union, which has been rejected by ministers, would be the least damaging but would still see growth across different parts of the country between 1% and 3% lower than current forecasts.
In the event of a limited free trade deal being negotiated, projected growth would be 8% lower in the West Midlands, north-west England and Northern Ireland, by 6% in Scotland and 5.5% in Wales.
Should the UK leave the EU in March 2019 without any kind of deal, it suggests four parts of the UK would see a double digit slowdown in GDP growth.
As well as north-east England, north-west England and Northern Ireland would see a 12% slowdown, while the West Midlands would see a 13% slowdown.
Other official estimates suggest the UK car industry’s GDP would shrink by 1% if the UK remained in the EU single market but would lose 8% if there was a free trade agreement and 8.5% if the UK left without a deal and went to World Trade Organisation (WTO) rules.
The figures emerged as representatives of Nissan and other Japanese companies are set to meet Theresa May and Chancellor Philip Hammond on Thursday.
Former attorney general and Conservative MP Dominic Grieve said the figures illustrated the risks of leaving the EU without a deal, which he said would hurt the “poorest and vulnerable” in society.
Even if the UK achieved its stated objective of a deep and special partnership with the EU and trade deals with countries like the US, he said it was likely to yield, at best, a very small economic boost.
But Eurosceptic Conservative MP John Redwood said the risks of a no-deal scenario had been overestimated and the Treasury figures were “complete nonsense”.

Source: BBC

May to tell Japanese firms she wants EU deal as soon as possible

In World Economy News 09/02/2018

Theresa May will tell Japanese investors in Britain that she wants a Brexit transition deal as soon as possible, her spokesman told reporters.
The prime minister and Chancellor Philip Hammond are due to meet Japanese companies, including the three big carmakers, later on Thursday.
The plan for a meeting was first raised when Theresa May visited Japan last year.
But it comes amid fresh debate among business over Brexit negotiations.
The prime minister’s spokesman said: “We’ve been clear about the sort of deal that we want to secure and that we want trade which is as frictionless as possible.
“I am sure the PM will be reiterating that when she meets the companies today and also the commitment to securing the implementation period as soon as possible to give them a period of time to adjust.”
Carmakers Nissan, Toyota and Honda were due to attend the talks, along with representatives from banks and drug companies.
Japanese firms have spent billions of pounds in Britain over the past decades, encouraged to set up in the country by successive governments promising a business-friendly base from which to trade across the continent.
Nissan, Toyota and Honda began their UK operations in Britain in the 1980s and now build nearly half of all of Britain’s 1.67 million cars. The big majority of these are exported.
The motor industry has expressed concern that their exports could face tariffs of up to 10% and be subject to customs delays after Britain leaves the European Union.
Japanese drug companies have also made Britain their European base. Some are concerned about future drug regulations, with any divergence with the EU likely to pose regulatory challenges.
London is also home to Japanese banks, such as Nomura, Daiwa Securities and Sumitomo Mitsui Financial. Like other foreign banks, they are keen to know about trading and so-called “passporting” arrangements for access to the EU.
In 2016 Nissan chief executive Carlos Ghosn met prime minister Theresa May amid fears over the future of its production plant in Sunderland.
Nissan sought assurances over post-Brexit arrangements ahead of future investment in the Sunderland plant, Britain’s biggest car factory.

Source: BBC