Contents
List of figures and tables 2
Summary and recommendations 3
1. Introduction 7
Immediate economic impact of the vote for Brexit 8
Long-term economic impact of Brexit 10
Outline of this report 11
2. How Brexit might affect the UK economy 12
Trade 12
Foreign direct investment 14
Number and type of workers 15
Regulations 16
Productivity 17
Value of sterling 18
Other policy responses 18
3. How large is the impact likely to be? 20
Describing the long-term economic impact of Brexit 23
What would happen if the UK stayed in the EU? 24
Ways of modelling the economy 25
Trade costs 27
Investment 41
Domestic regulations 42
Migration 44
Contributions to the EU budget 45
Productivity growth 46
4. How will the impact vary across the UK? 48
Distributional implications of the Economists for Free Trade model 48
How will Brexit affect different sectors of the economy? 49
How will Brexit affect different regions of the UK? 53
How will Brexit affect people in different income groups? 55
2 UNDERSTANDING THE ECONOMIC IMPACT OF BREXIT
5. From here to there: the economic implications of adapting to a new
relationship 57
Short-term disruption could be significant… 57
…but some costs associated with divergence could take time
to emerge 58
Conclusion 60
Appendix: Overview of existing studies of the economic impact of Brexit 64
References 67
List of figures and tables
Figure 1 Forecast long-term impact of Brexit on GDP,
relative to remaining in the EU 4
Figure 2 Forecast long-term impact of Brexit on GDP,
relative to remaining in the EU 22
Figure 3 Forecast long-term impact of Brexit on per capita GDP,
relative to remaining in the EU 24
Figure 4 Comparison of estimates of non-tariff barriers by sector
(% tariff rate equivalent) 33
Table 1 Assumptions about free trade agreements with non-EU countries 31
Table 2 How much would non-tariff barriers to trade change
following Brexit? 38
Table 3 Comparing the estimated impact of Brexit on UK economic
output, with and without allowance for an effect on productivity 47
Table 4 Uncertainty around the central projections for the economic
impact of Brexit 64
Table 5 Assumptions about changes to foreign direct investment (FDI)
post-Brexit 65
Table 6 Assumptions about changes to migration post-Brexit 66