Hard Brexit 'would put UK economic recovery at risk'

Britain's economic recovery is at risk if it ends up with a so-called hard Brexit from the European Union, a respected think-tank has warned.

High levels of immigration and foreign capital helped the UK bounce back more quickly than single currency nations after the 2008 crash, Chatham House said.

A divorce settlement that curbed migration and investment flows would jeopardise future prosperity, according to its report.

But a separate report found that even if the economy takes a downturn it is "not inevitable" the public would turn against quitting the bloc.

The National Centre for Social Research (NatCen) found there was a "widespread scepticism about the expertise of experts" - a claim made by former Cabinet minister Michael Gove - during the referendum campaign.

Its report examined why Remain lost and found that many voters were not convinced that EU membership had been economically beneficial in the past or would be in future.

Politicians arguing to stay in the bloc were less likely to be trusted than those on the Leave side and then prime minister David Cameron was clearly "less popular" with voters than Boris Johnson.

Combined with concerns over immigration, it meant the Government was trying to win the referendum with a "one-legged stool".

Prof John Curtice, NatCen senior research fellow, said: "We should not assume that the public will turn against Brexit if economic difficulties follow the vote to leave the EU.

"Many of those who voted to Leave exhibited a distrust of financial institutions and experts that suggests they could well point the finger of blame instead at those same institutions and experts if markets react adversely to Brexit.

"That said, they are looking to the Government to negotiate a deal that ensures that in the end the consequences are at least economically neutral."

Chatham House's report looked to the future and warned that limiting access to the single market would dent investor confidence and could harm the economic recovery.

Losing membership would be "particularly damaging" for the financial services industry which would hit output and employment, it said.

Theresa May has indicated that her priority for a post-Brexit deal is control over immigration, which most observers believe will force the UK out of the single market.

Chatham House concedes that without a deal to restrain freedom of movement, something EU leaders have said cannot happen if Britain remains part of the internal market, there is likely to be a "political backlash".

"Obviously the UK leadership will want to avoid this, but it finds itself between a rock and a hard place," its report states. "A lot of political talent will be needed to navigate past this."

It adds: "If the UK becomes less attractive as an investment destination, and stricter immigration policy causes the labour force to shrink, then it may find it difficult to attract the quantity of foreign capital and labour necessary to keep a domestic demand-driven economy dependent on foreign capital and labour in balance."

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