Amid all the announcements today, it's easy to overlook that the OBR has updated its scenario on a no-deal Brexit. It exposes an undeniably hard reality for the Govt that claims that the UK would "prosper mightily" under no-deal next year.

(Short thread)

1. Key chart: a no-deal/WTO/Australia-style Brexit would delay the point at which econ output regains its pre-virus peak by "almost a year to the third quarter of 2023."

In the upside scenario, this cross-over point could be at the start of 2022; in the downside, in 2025. Grim.
2. Next year, a no deal Brexit would reduce real GDP by around a further 2% - as a result of immediate disruption to the border and uncertainty facing businesses. That's on top of the Covid-related contraction.
3. While there's some short-term border disruption, most of the costs come in the medium term: from lost employment; productivity losses; lower business investment.

Exactly the opposite of what the Chancellor said to @AndrewMarr9 on Sunday. https://t.co/2FEroyGUwL
4. Underneath these numbers, output would fall *below* the Covid levels for several key sectors: Manufacturing, professional services, financial services, retail, energy.

All trade intensive sectors that have been spared the same drop in output as the non-tradables this year.
5. Crucially, the OBR notes, no-deal would have additive effects to the hit by Covid, not replace it (contrary to the popular, but non-sensical narrative in Govt recently). It's a recipe for screwing the outward-facing side of the economy - which has been its engine during Covid
6. Under no-deal, the OBR also expect the inflation to rise by 1% next year - caused by new tariffs and regulatory and customs barriers with the EU.
7. The unemployment numbers are also expected to rise up to 8.3% next year (under the central scenario).
8. By the way, these numbers assume that the lockdown ends on 2 Dec; the test-and-trace system is "partly effective" and the vaccination programme begins next year with "medium-high" success rate. A lot of big assumptions.
9. If there's one undeniable fact from the OBR figures, it's that the UK will not "prosper mightily" under no-deal, as the Prime Minister likes to claim.

It'd be more than an act of self-harm to not agree a trade deal with the EU. It would be a full-blown economic suicide

(End)

More from Brexit

On this, I think it’s highly unlikely to occur in the timeframe given. For several reasons, I don’t think it’s realistic for Scotland to secede, and then join the EU, in 9 years.

For that, thanks goes to Brexit.

A thread because why not...


Two important dates: March 2016 and January 1st 2021.

Firstly, prior to the 2014 referendum, the Nationalists proposed a date of March 2016 to secede.

Secondly, today - the end completion of Brexit five-and-a-half years after Cameron’s majority in 2015.

Brexit has demonstrated many things, primarily that splitting unions is not easy. The UKs membership of the EU was 47 years and by the end it was not at the heart of the EU. The Union has existed for over 300 as a unitary state.

Dividing a unitary state, like the UK, will not be easy. Frankly, it will make Brexit look simple. Questions of debt, currency, defence, and more will need to be resolved ... something not addressed with Brexit.

Starting with debt. Scotland will end up with its proportionate share of the UKs national debt. It’s not credible to suggest otherwise. Negotiating what is proportionate won’t be easy when both sides disagree.

It’s importance will be seen shortly.

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