January 24, 2018 / 5:55 PM / a year ago

UK's pre-referendum Brexit forecasts no longer valid: finance ministry

An EU flag and Union flag are seen flying together during an anti-Brexit protest near the Houses of Parliament in London, Britain, December 8, 2017. REUTERS/Toby Melville

LONDON (Reuters) - The top official at Britain’s finance ministry said his department’s forecasts of a big hit to the economy from Brexit, made shortly before the June 2016 EU membership referendum, were no longer applicable.

Brexit supporters have long criticized the projections as part of a “Project Fear” they say was led by former prime minister David Cameron and his finance minister George Osborne.

The forecasts said that within 15 years Britain’s economy could be between 3.4 and 9.5 percent smaller if it left the EU than if it had stayed in.

Tom Scholar told lawmakers on Wednesday the forecasts were based on an assumption that Britain would immediately start the process of leaving the European Union, and they did not include any stimulus measures for the economy.

In fact, Britain took nine months to launch the Brexit process and the Bank of England pumped in stimulus shortly after the vote. Last November, the government announced measures which were also aimed at helping the economy.

“The third (factor) I would say is that the global economy has recovered much more strongly ...than we expected at the time,” Scholar said.

Britain’s economy has withstood the Brexit vote shock better than most private economists expected, but it has lagged behind growth rates achieved in other advanced economies.

Speaking to the Treasury Committee in the lower house of parliament, Scholar also said the forecasts were based on three potential scenarios for Britain’s future relationship outside the EU, but not the one that British Prime Minister Theresa May wants: a tailor-made trade deal with the bloc.

“I don’t think the pre-referendum analysis is useful in the current debate about our attempts to secure a deep and special partnership because that’s a different thing to any of the three scenarios that were illustrated in that paper,” he said.

Reporting by William Schomberg; editing by John Stonestreet

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