UK faces losing £36bn a year from Theresa May’s hard Brexit
And that’s just the economic impact of being out of the single market on the UK’s services trade.
A new report from the Centre for Economics and Business Research (Cebr) puts the cost of leaving the single market on UK services at between £25bn and £36bn a year. This amounts to a 1.4% to 2% gross loss to the country’s GDP and covers a likely decline in services exports including financial services, transport services, IT/Telecoms and Intellectual Property.
The table below from Cebr’s report shows the estimated costs to the UK’s services exports in two scenarios (mild loss and heavy loss).
The research commissioned by Open Britain suggests that even if the UK and EU were able to agree a new free trade deal, it is unlikely to cover the services sector. This is because membership of the single market allows all members to operate under the same rules, tariff-free and with minimal red tape.
Truly free trade is not just tariff free; it reduces rules and red tape, something that is particularly important for services, which make up 80% of our economy.
Nick Clegg, Liberal Democrat Brexit spokesperson
In a statement about the report for Open Britain, Lib Dem Brexit spokesperson Nick Clegg said “truly free trade is not just tariff-free; it reduces rules and red tape, something that is particularly important for services, which make up 80% of the economy”. He added that ministers should stop “pretending that we can have all the benefits outside of the single market as in it” and that they deal “in reality rather than rhetoric”.
— Open Britain (@Open_Britain) 22 May 2017
You can find more of the report’s findings at open-britain.co.uk.
Leaving the single market will cost more than the UK’s EU membership fee
The UK’s net contribution to the EU budget in 2016 was £8.6bn (figure from Full Fact). But as indicated by Cebr’s report, pursuing a hard Brexit risks the UK losing between £25bn and £36bn a year. This suggests the loss to the economy of leaving the single market as potentially being more than three times what we currently pay for membership.
The Cebr isn’t alone in their conclusion about the value of single market membership. Previous research from the National Institute for Economic and Social Research (NIESR) also came to the conclusion that a free trade deal would be incomparable to single market membership. NIESR’s analysis went further saying that even if the UK were able to agree free trade deals with the EU as well as with a host of other countries including the USA, Canada, Australia, Brazil, India, China and Russia, it would not make up for the loss from leaving the single market.
This is a vital reminder of the overwhelming benefits of single market membership. Indeed, the benefits are so overwhelming that Germany’s foreign affairs minister Sigmar Gabriel acknowledged that EU membership was worth more than what they paid into the EU. As Politico reports, Gabriel said “every euro that we make available for the EU budget, comes back to us – directly or indirectly”. He made the case that Germany profited more from membership in the form of trade and jobs. The research from Cebr and NIESR suggests the UK also profits more from membership than it pays in.
And as an EU member, the UK also has a role in influencing the rules of how the single market operates. So whilst non-EU countries including Norway, Iceland, Liechtenstein and Switzerland are members of the single market, they have no influence over the rules. Yet, the value of being in it is such that they are willing to accept the rules including freedom of movement as well as pay a contribution.
The report is a stark warning to the UK ahead of the general election. The Tory government under Theresa May has again committed to leaving the single market and customs union by putting it in their manifesto. And as prime minister, Theresa May has made ending freedom of movement and leaving the jurisdiction of the European Court of Justice her red lines in Brexit talks. It’s a position that makes it impossible for the UK to agree a free trade deal with the EU that covers the UK’s valuable services trade.
Speaking in Wales today, May warned that Brexit will have “dire” consequences. But this new research suggests that it is the hard Brexit she is pursuing that will have dire consequences for the country. Perhaps this is why her government has failed to do an economic impact assessment of Brexit and why the Tories have failed to cost their manifesto.