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'No-deal' Brexit will cost every person in UK £1,585, US think-tank warns

A ‘no-deal’ Brexit will lead only one way, to a poorer Britain, a US think-tank says (DANIEL LEAL-OLIVAS/AFP/Getty Images)
A ‘no-deal’ Brexit will lead only one way, to a poorer Britain, a US think-tank says (DANIEL LEAL-OLIVAS/AFP/Getty Images)

A “no-deal” Brexit will cost every person in the UK £1,585 and inflict a £105bn hit on the economy, an influential US think-tank has predicted.

The Rand Corporation says walking away from the European Union without settling trading arrangements will leave Britain at least 4.7% poorer over 10 years.

And, it warns any benefit from breaking away from EU laws and regulations will not be felt in the UK until 2031 at the earliest.

MORE: Britain’s May hails new optimism in Brexit talks after deal

Meanwhile, the loss to the EU from a no-deal scenario will be negligible – a 0.7% hit to GDP over ten years.

“The analysis clearly shows that the UK will be economically worse-off outside of the EU under most trade scenarios – the key question for the UK is how much worse-off,” said Charles Ries, a vice-president at Rand and the report’s lead author.

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“It is in the best interests of the UK, and to a lesser extent the EU, to achieve some sort of open trading and investment relationship post-Brexit.”

Prime Minister Theresa May and European Commission chief Jean-Claude Juncker have agreed on the terms of the Brexit divorce (AFP/EMMANUEL DUNAND)
Prime Minister Theresa May and European Commission chief Jean-Claude Juncker have agreed on the terms of the Brexit divorce (AFP/EMMANUEL DUNAND)

The Rand Corporation, a non-profit group, measured percentage and monetary changes in GDP growth, GDP per capita, trade and foreign direct investment for the UK, EU and US under eight different trade scenarios.

It concluded the most beneficial model to the UK economy would be a trilateral UK-EU-US agreement.

Under this scenario, UK GDP would be 2.25 higher – or 7.1 percentage points better – than under the WTO rules scenario.

MORE: Brexit: UK to lose 10,500 City jobs as 30 per cent of firms flag plans to move staff

Its report argues that Brexit was likely to have a “mostly negative effect” on US interests in Europe.

“An EU without the UK may be more willing to create barriers for non-EU companies, to the detriment of US companies and the American economy,” the report says.

“In the development of EU defence policy, for example, the UK aim was often to ensure that EU measures did not undermine NATO and the strong transatlantic partnership.”


But it is in Britain where the pain will be felt most keenly, says the report.

Leaving the EU to fall back on WTO rules – a no-deal – would see foreign direct investment (FDI) from the EU to the UK fall by about £5.85bn.

MORE: What is ‘Canada plus plus plus’, the Brexit trade deal David Davis wants?

If the UK signs a far-reaching free trade agreement with the EU, Theresa May’s best-case scenario, Rand estimates the UK would suffer a loss in FDI from the EU27 of only about £2.55bn, representing a 9% fall.

The report does strike a note of optimism, however, once free trade talks start. It says “fault lines” could emerge among the 27 remaining EU states, especially between those that use the euro and those that do not.

Rand says that could see the UK in a stronger negotiating position – using differing positions on citizens’ rights, financial services and agriculture, for example, to secure better terms for deals with individual countries and the UK.