Brexit will make UK worse off, government forecasts warn

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The UK will be poorer economically under any form of Brexit, compared with staying in the EU, new government analysis suggests.

Official figures say the UK economy could be up to 3.9% smaller after 15 years under Theresa May's Brexit plan, compared with staying in the EU.

But a no-deal Brexit could deliver a 9.3% hit, the new estimates say.

The prime minister said her deal was the best one available for jobs and the economy.

"Our deal is the best deal available for jobs and our economy, that allows us to honour the referendum and realise the opportunities of Brexit," Mrs May said at Prime Minister's Questions.

The government's Brexit deal faces a potentially difficult vote in the House of Commons on 11 December.

Before that Mrs May is touring the country to promote the deal and was due to be in Scotland on Wednesday afternoon.

What do the forecasts show?

Confusingly the 83-page document does not forecast the impact of the prime minister's current deal.

Instead it looks at the potential impact of the proposals agreed by the Cabinet at Chequers in July, which is the basis of the current proposal.

Under those circumstances the economy would be 3.9% smaller than if the UK had remained part of the European Union.

The estimates do not put a cash figure on the potential impact on the economy, but independent experts have said that 3.9% of GDP would equate to about £100bn a year by the 2030s.

The government report also examines three other possible scenarios including a no-deal Brexit, which would be the most damaging.

The economy will continue to grow under all the scenarios, but there is a wide variation in how much.

What is the political reaction?

Former Brexit Secretary David Davis questioned the research, saying previous Treasury forecasts had been proved wrong and were based on "flawed assumptions".

Chancellor Philip Hammond said the planned Brexit deal combined most of the economic benefits of remaining in the EU with the political benefits of leaving the EU.

Asked if the UK would be poorer under Mrs May's deal, he said: "The economy will be slightly smaller in the prime minister's preferred version of the future partnership."

But Mr Hammond argued that staying in the EU was not politically "viable".

What about trade deals?

Veteran Conservative Eurosceptic Sir Bill Cash said Mr Hammond was effectively arguing for the UK to stay in the European Union in his "extraordinary" statement.

He said the chancellor had ignored potential economic benefits of leaving the EU, asking: "What about the trade deals which could give us the most enormous opportunities throughout the world, if we are able to strike them?"

Under Mrs May's deal, the UK would be able to negotiate trade deals during the transition period after 29 March's Brexit day, but would not be able to implement them until the end of the planned 21-month transition period, which could itself be extended.

How accurate are the forecasts?

By Andrew Walker, BBC economics correspondent

This exercise doesn't predict how much the economy will grow over the 15-year period, but rather the impact of specific changes in Britain's trade relationships, other things being equal.

That is after all the question we want answered. One problem is that it will be harder to judge when we look back whether the figures were right, because we would be comparing what actually happened with a hypothetical alternative that didn't.

The same applies to the impact on the government's finances. That said, all the scenarios in the analysis show an adverse effect; the saving on contributions to the EU is more than offset by the lower tax revenues that would result from the weaker economic growth.

There are also some striking differences in regional economic impacts. In the no-deal situation the biggest effects are in North East England and the West Midlands. London gets away with least damage in that situation, but the capital is worst hit in the government's preferred option.

That is because London specialises in services that would gain less, compared to no deal, than manufacturing from the relationship the government is seeking to negotiate.