Spending watchdog compares hard Brexit to three-day week
THE public spending watchdog has compared the economic damage of a disorderly Brexit to the three-day week imposed in 1974, warning of delays to imports and queues at borders.
In this period output fell by 3pc over three months, as efforts to conserve electricity amid fuel shortages – a result of coal mining strikes – took a significant toll on industrial production.
The OBR said: “A disorderly exit might well result in temporary constraints on the supply of some imported products and domestic goods that contain imported components.”
There could also be “bottlenecks” at borders, and attempts by house- holds and businesses to stockpile ahead of time could “further aggravate” goods shortages.
It added it was “next to impossible” to estimate the impact of a disorderly Brexit on the economy, but the disruption of 1974’s three-day week was “worth noting”. Nicky Morgan, chairman of the Treasury select committee, told “When the independent OBR equates leaving the EU with no deal to the Seventies’ threeday week then any right-thinking person must know they can’t inflict such a situation on their fellow citizens.
“No deal would be a very bad deal,” she added. In the dossier of more than 100 pages, the Office for Budget Responsibility, the independent body that checks the Chancellor’s maths, has examined several forecasts of how Brexit will impact the UK economy.
The paper said that the OBR lacks the detail needed for a meaningful forecast how a final Brexit deal will impact the economy. Instead it can only include some “broad assumptions”, such as a lower migration levels, in its assessments of government finances.
The OBR said: “Other things being equal, the greater the barriers to trade and migration flows with the EU as a result of Brexit, the more adverse the prospective impact on the economy and the public finances.”
It also noted that the benefits from trade deals generated through an independent UK trade policy as a result of quitting the EU, would, at best, not be felt for several years.
“The US has taken an average of almost four years to negotiate and implement its trade deals, China has taken an average of almost six years and India almost seven years,” the OBR said.
As a result, the OBR cannot include any benefits from free-trade agreements in its near-term forecasts. It can only produce this work based on present government policy, not a trade agreement that “has yet to be negotiated” it said.