Banking News

Brexit Impact Already Exceeds EU Budget Payments - CER

(24 June 2018 - United Kingdom) The Centre for European Reform (CER) reports in an economic study that the damage to the UK economy caused by the vote to leave the European Union already exceeds the size of budget contributions the UK will earn back when it eventually departs the EU in March 2019.

According to the CER’s research, the UK economy is 2.1 percent smaller than it would have been if Britain had voted to stay in the EU, depleting public finances by £23 billion pounds in lost tax revenue. The CER’s findings aligns with the leaders of five major business lobby groups that also warned Prime Minister  Theresa May that the ongoing uncertainty about Brexit could cost the economy billions of pounds.

The CER analysis, to be updated quarterly, used a statistical model that compared the UK's economic performance against predicted output if the referendum result had gone the other way. It did so by identifying which OECD countries' gross domestic product, consumption and investment data best replicated the UK economy in the two decades leading up to the referendum. The UK banking industry has accepted the referendum result and is preparing for Brexit however the CER points out that it remains in its interest for the UK and EU to come to an arrangement that maintains mutual, cross-border, market access for UK and EU-based institutions and for continued easy access to EU talent. The industry is also in favour of a long transition period, agreed as quickly as possible.

"Two years on from the referendum, we now know that the Brexit vote has seriously damaged the economy," said CER Deputy Director John Springford. “We know that the government's Brexit dividend is a myth: the vote is costing the Treasury £440 million a week, far more than the UK ever contributed to the EU budget." The economic damage means the Treasury has less money to spend on public services, and knocks on the head the idea that Britain will enjoy a "Brexit dividend" when it no longer has to contribute to the European budget.