Estimates of lower GDP growth post-Brexit don’t mean a recession

4 May 2018
What was claimed

Brexit will lead to a cut to GDP of between 3%, 5% and 8%. However you look at it, that’s a recession.

Our verdict

This is based on government figures which were actually saying that economic growth is likely to slow down, not that a recession is likely.

“Condemning the economic impact [of Brexit], that the government themselves have said. A cut to GDP of between three, five, and eight percent. Whichever way you sell it, soft or hard, that is a recession.”

Matt Forde, 3 May 2018

Figures published by the government on the economic impact of different Brexit scenarios suggested that over the next 15 years economic growth might be reduced by around 2% if the UK remains in an “EEA-Type Scenario”—for example a similar sort of relationship to the EU as the one Norway has.

They are suggesting that instead of the economy growing by about 25% over 15 years, it might instead grow by something like 23%.

It suggested growth could be reduced by around 5% if the UK enters into a free trade agreement with the EU, and by around 8% if it leaves the EU without a deal and trades on World Trade Organisation terms.

In its analysis, the government said it planned to pursue “a more ambitious deal” than any of these and that the “global environment, [the] EU’s policy outlook and sectoral issues” would all affect the outcome. Overall, the government emphasised that the analysis was a work in progress and “is not representative of the expected outcome of the negotiations.”

These figures don’t mean that the government thinks there will be a recession. A recession would mean the economy is shrinking, whereas these figures are about it growing less quickly than it otherwise might have.

There are a wide range of estimates on what might happen to the UK economy in the long-term after Brexit is complete. Most predict that growth will be slower.

We’ve written more about interpreting economic models and predictions here.

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