The past fortnight has seen growing difficulties related to Brexit, as the potential economic costs of leaving the EU have been made clearer. The Autumn Statement by the Chancellor of the Exchequer, the UK finance minister, offered a first glimpse of the potential fiscal impact of Brexit, while a report by the Centre for Economic and Business Research stressed the potential losses of a ‘hard’ Brexit. There was also political turbulence as the pro-Brexit UK Independence Party (UKIP) elected a new leader after months of uncertainty. A unified UKIP could see the pressure on the UK government to work towards a hard Brexit strengthened, even as the potential economic cost of this becomes clearer.
On 23 November, Chancellor of the Exchequer Philip Hammond delivered his Autumn Statement, in which he presented to Parliament the forecasted figures for the UK’s public finances, and gave an indication of the fiscal policy of the UK government in the coming year. The headline narrative revealed was that Brexit is expected to produce a major fiscal deterioration for the UK. Hammond announced that the non-political Office for Budget Responsibility (OBR) forecasts that Brexit will reduce UK economic growth by 2.4% in the period until 2020. This is forecast to increase borrowing by £122 billion (€143 billion). In light of this, the government abandoned its aim to bring the UK budget into balance by the end of this Parliament.
Losses to ‘almost every sector’
On 27 November, the Centre for Economic and Business research released a report warning of the economic losses of a hard Brexit, in which the UK leaves the EU’s single market. The report was commissioned by Open Britain, the cross-partisan group that is advocating for a soft Brexit. The report demonstrates how Remain advocating politicians, armed with economic evidence, will seek to avert a hard Brexit.
Questioning the sectoral approach reportedly being considered by the government, the report stated that “all major sectors are linked to the EU and could be harmed if the UK government sought a free trade agreement which prioritised some sectors over others.”
Nuttall new UKIP leader
After a uncertain few months, UKIP finally elected a new leader on 28 November. Paul Nuttall, the former deputy leader of the party, was elected with 62.6% of the vote, while his nearest challenger, Suzanne Evans, won just 19.3% of the vote. His election, especially with such a strong mandate, raises the prospect of a unified UKIP and pressuring the UK government to adopt a hard-line approach to Brexit.
In a nutshell, the past fortnight has demonstrated the very difficult set of circumstances facing the UK government as it seeks to formulate its position on Brexit, as it is buffeted by economic and political pressures pushing it in several directions.