Brexit will lead to weaker economic growth, watchdog warns

BRITAIN will be worse off as a result of leaving the EU, even if Boris Johnson succeeds in securing a free trade deal with Brussels, the Office for Budget Responsibility (OBR) has warned.

The OBR estimated that even with an orderly move to new trading arrangements, when the Brexit transition period ends at the end of 2020,

GDP will be 4% down over the next 15 years compared with what it would have been.

Since the 52%-48% referendum vote to leave in June 2016, the watchdog said output was down by about 2% on what would have been expected if the country had chosen to remain.

The main reason, the OBR said, was weaker productivity growth as a result of “depressed” business investment, and a diversion of resources away from production to preparing for the various potential Brexit outcomes.

The OBR said real business investment had “barely grown” since the referendum, whereas in its last forecasts before the vote it was predicting it would have risen by more than 20% by now.

The shortfall is expected to be partly reversed as the details of Britain’s future trading relationship with the EU become clear and business uncertainty reduces.

Against this, however, the OBR said that it expected the “adverse effect” of higher trade barriers to build over the next five-year forecast period and beyond.

“Broadly speaking, we believe that around one third of the long-run hit to productivity from Brexit has already happened, that another third is likely to come over the forecast period and the rest comes through beyond our forecast horizon,” he said.