Think tank warns UK economy would be stunted under most benign post-Brexit deal

Leaving the EU would stunt the British economy even under the most "benign" post-Brexit deal, a think tank said.

Analysis of nine different outcomes by Oxford Economics found that "in any plausible scenario the UK economy is likely to be smaller by 2030".

It said the impact "could be limited" but only if there was little change to the status quo - such as if immigration was allowed to continue at a high rate and the UK still made contributions to the EU budget or remained part of the customs union.

Such policies, however, appeared "unlikely to be politically viable after a vote to leave", it said, calculating that the economy could be between 1.8% and 3.9% smaller under more realistic scenarios by 2030 than if the UK voted "remain" on June 23.

Pro-EU campaigners said the report exposed the "devastating" consequences of a no vote but those pressing for a divorce from Brussels said it was based on "flawed" assumptions.

The report concluded: "In any scenario involving a significant clampdown on immigration, the overall fiscal position deteriorates markedly by 2030".

"This would require further annual tax rises or spending cuts equivalent to between £22 billion and £31 billion today, a fiscal hole that could be closed by raising VAT by between 4% to 6%."

Associate Director Henry Worthington, who led the analysis, said: "The long term impact of Brexit on the UK need not be severe.

"But benign scenarios involve retaining some of the least popular aspects of EU membership: continued high levels of immigration, restrictions on our ability to make trade deals with non-EU countries, and continuing to pay money to Brussels.

"Despite the short-term benefit to the UK budget of no longer contributing to Brussels, populist policy choices would damage tax revenues by much more. The result would be even more austerity."

The impact of Brexit on the rest of Europe "will be negligible in any scenario", the study found.

Stuart Rose, chairman of Britain Stronger In Europe, said the report "clearly demonstrates the devastating impact a vote to leave the EU would have on the UK economy.

"Even in the best case scenario we risk seeing a decline in GDP and a loss of income for every household in the UK.

"This comes days after the CBI has warned that a million jobs could be lost and that the UK economy could be hit by up to £100bn.

"This is the risk the Out campaigners are willing to take - and yet they still have no viable alternative for the UK outside of Europe. Simply asserting 'everything will be ok if we leave' is simply not good enough."

Vote Leave said the report contained "flawed assumptions as well as some revealing admissions".

Chief executive Matthew Elliott said: "Another day, another pro-EU campaign report that admits that our economy will grow and employment will rise if we Vote Leave.

"Business will thrive outside of the EU just as it has thrived outside of the euro - despite the warnings to the contrary made by pro-EU campaigners 15 years ago."

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