Easy to see why Government wanted to keep Brexit analysis secret

Easy to see why Government wanted to keep Brexit analysis secret

The Brexit paper is the official work of cross-departmental economists

The EU Exit Analysis: Cross Whitehall Briefing may have been marked "Official - Sensitive" and "Market Sensitive", but the reality was that the 29-page document is deeply politically sensitive, for the Government and its strategy.

Of course some MPs will describe the numbers as garbage, others as proof that their concerns are inevitably true.

It is the official work of cross-departmental economists, and its preamble reveals that it has been put together in a different way to the pre-referendum Treasury forecasts.

It is modest about what can be predicted, but says the work was done to give a "broad directional" picture on the "best available evidence".

Tusk says the EU does not want to build a wall around Britain

Even if you don't believe the numbers, it provides some pointers and reveals some realities.


Firstly on the issue of the past 24 hours - the City and financial services. Even with a Free Trade Agreement "market access would be hampered almost to the same extent as the World Trade Organisation scenario". It stresses the limitations "of the current equivalency regimes".

These factors among others mean that "London's status as a financial centre could be severely eroded". This is far from the message offered only yesterday on the Chancellor's speech on Brexit and financial services.

There is also some revealing internal analysis of the Government's unprecedented target relationship.

Hammond makes case for Brexit City deal

The PM's "Florence model" out of the customs union could lead to "high" customs barriers and some "low" tariffs.

Only the "Customs Partnership" option, described as "blue skies" by David Davis, would maintain zero customs barriers.

A "no deal" outcome, even one mitigated ahead of time, would lead to "high" customs barriers, "high" trade barriers away from borders and "high" tariffs with the EU.

Tariffs though, aren't the real problem. That was confirmed by the EU27 offer yesterday of a tariff free deal on goods.

Theresa May defends her Brexit plans in the Commons

The entire report reads like a plea from the Civil Service for ministers to actually understand the concept of non-tariff barriers. Such barriers of regulation, employment, standards etc are the "most material factor" - ie the most damaging to the economy.

As revealed by Sky News last month, when converted to an equivalent tariff, these numbers are huge in certain sectors - retail, defence, agriculture, food and drink, motor vehicles and chemicals.

With no guide to how to model the increase in costs from leaving a free trade agreement, the analysis uses adjusted estimates on the effect of joining one.

It is this that drives the rest of the bad news in the numbers.

Theresa May insists she's not cherry-picking over UK Brexit deal

It is why the loss in trade from the introduction of new non-tariff barriers into European trade hugely outweighs the total impact of signing free trade deals with the US, Australia, New Zealand, the whole of the Trans Pacific Partnership, ASEAN, the Gulf Co-operation Council, China and India.

It is 0.7% of GDP upside versus the downside of -3 to -10% of GDP from leaving the single market, customs union or leaving with no deal.

This should not be surprising, even if it is fair to say that such specific long range predictions are difficult. The analysis is enumerating what is clear but not necessarily obvious.

The single market is by its design (by British civil servants such as Lord Cockfield) meant to eliminate non-tariff barriers.

Leaving the single market as a policy aim is also a policy to introduce non-tariff barriers into Britain's trade. These are the most important barriers for a service based economy.

May: No one will get everything they want

Modelling such barriers is difficult, but likely to fall within certain parameters.

The impacts will hit sectors most exposed to European trade, and in turn regions such as the North East, West Midlands and Northern Ireland which have the highest concentrations of such trade.

The mathematics does not support the notion that gains from free trade deals will outweigh more than a fraction of the trade losses from introducing barriers into trade with our biggest market.

But even if they did, there would still be sectors that suffered badly from losing frictionless access to European markets, indeed from the loss of a continent of 440 million as a barrier-free home market.

Blair on leaving EU: Brexit is 50-50

Clearly the June 2016 referendum result was not about economics.

But there may be a small clue into the Government's thinking on the future relationship.

In one of the final pages showing how there is no Brexit dividend (essentially the fiscal impact of non-tariff barriers alone outweighs the savings on EU budget payments), it says "Swiss-style" payments could be made into the EU budget, even in a free-trade relationship. So Switzerland it is.

John Major: MPs should be offered vote deal on final deal

Even if you hate the numbers, the document is useful, and is clearly informing the PM's approach, for example following EU rules on chemicals and pharmaceuticals.

It shows that new non-tariff barriers are inevitable with the EU under its red lines and the aim of policy should be to minimise them.

And for those that believe the numbers; that the UK Government is actively pursuing a policy outcome with this range of calculated impacts, is a first in history.