Brexit impact studies leak ahead of crunch 'war cabinet' talks

Theresa May's Brexit "war cabinet" will meet again on Thursday against a backdrop of official forecasts showing the regions and sectors of the economy which face being hardest-hit by withdrawing from the European Union.

Impact studies released to MPs by the Government reveal the North East of England and West Midlands will sustain the biggest hit to economic growth from Brexit.

London will take the least damage, according to the controversial forecasts which ministers were forced to release after they were leaked to the media and amid pressure from Labour and pro-EU Tories.

MPs have been reading the documents, which were prepared by the Department for Exiting the EU, under controlled conditions, but the figures have been leaked.

Meanwhile, Sky News also obtained official estimates of the potential impact of non-tariff barriers - such as extra red tape, customs checks and rules of origin regulations - on various economic sectors.

The motor industry faces cost increases of between 5% and 13%, while the retail and wholesale industry could see costs rise by between 7% and 20%.

The economically important financial services sector stands to suffer a 5% to 10% cost increase, but construction faces no extra costs.

The potential impact on automotive manufacturers could cause concerns as Mrs May prepares to host a meeting with Japanese business leaders on Thursday - including representatives from the country's motor industry.

The leaked figures have been seized upon by backers of a "soft" Brexit to protect the economy.

But officials said they did not show the impact of the Government's preferred post-Brexit option of an "unprecedented" economic partnership with the EU.

Mrs May chaired the Brexit sub-committee on Wednesday and do so again on Thursday to thrash out what kind of trade relationship the UK will seek in negotiations.

Figures showed the North East would take an 11% hit to economic growth under a free trade deal with the EU, while leaving with no deal will result in a 16% dip, and staying in the single market amounts to a 3% decline.

In the West Midlands, a free trade deal would result in an 8% hit to growth, compared with 13% under "no deal", and 2.5% if the UK stays in the single market.

By comparison, London would sustain just a 2% hit to growth if the UK gets a free trade deal, 3.5% in a no deal scenario, and just 1% if the country stays in the single market.

Liberal Democrat Brexit spokesman Tom Brake said: "This is a damning outlook for Britain. The Tories are putting everything on the line because they do not care about the lives and livelihoods of the people of the UK.

"The Government need to start being clear what they are fighting for. They are still keeping no deal on the table despite how crippling it would be to the regional economy.

"People did not vote to make themselves poorer. They should be allowed a vote on the final deal and a chance to exit from Brexit."

Labour MP Stephen Doughty, a leading supporter of the pro-EU Open Britain campaign, said: "People in every corner of the United Kingdom will be shocked to see the Government's own assessment of the damage Brexit will do to their communities."

Earlier, Brussels released papers showing it wants to put in place a method to rapidly curtail the UK's single market benefits if it breaches agreements on a transition deal.

But the Prime Minister insisted she would be "robust" in Brexit talks and dismissed "noises off" from the EU.

She told MPs: "As I have said right from the very beginning we will hear noises off, we will hear all sorts of things being said about positions that are being taken.

"What matters is the positions we take in the negotiations as we sit down and negotiate the best deal. We've shown we can do that. We did it in December and we are going to do it again."

Ministers in the EU exit and trade (strategy and negotiations) sub-committee considered the issues of immigration and Northern Ireland on Wednesday and are expected to discuss the crucial issue of the UK's future relationship with Brussels on Thursday.

Responding to the leaks, a Government spokesman said: "This document does not represent Government policy and does not consider the outcome we are seeking in the negotiations.

"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."