Northern Ireland could take 12% GDP hit without a Brexit deal, papers show

The north east of England would also see a 16% slump to its output

Northern Ireland could take 12% GDP hit without a Brexit deal, papers show

Belfast City Hall is illuminated in the colours of Union flag after the Manchester concert bomb attack in 2017 | Image: David Young/PA Archive/PA Images

Updated: 21.30

A 'no deal' Brexit could see Northern Ireland's Gross Domestic Product (GDP) take a 12% hit, according to a British government analysis.

The document also speculates that north east England could see a 16% slump to its GDP levels.

The latest figures are contained in the EU Exit Analysis - Cross Whitehall Briefing, which was leaked last week.

In the House of Commons on Wednesday, an MP appeared to confirm the 12% number in a question to Northern Ireland Secretary Karen Bradley.

Stephen Gethins of the Scottish National Party (SNP) asked her: "The Scottish Government analysis has shown that a 'no deal' scenario could cost Scotland up to 8.5% of GDP.

"Government analysis suggests that Northern Ireland could be cost up to 12% of its GDP. Does she believe any analysis she has seen? And is this too high a price to pay to stop a Tory civil war breaking out?"

Ms Bradley said that the Secretary of the Department for Exiting the European Union "has dealt with the issues surrounding the leaked report".

"It is important to state that the UK government wants to achieve a good deal for the UK that protects the economic integrity of the UK," she added.

A view of London's financial district | File photo

Overall, the UK is predicted to suffer a 1.5% drop in GDP while remaining in the EU's single market via the European Economic Area (EEA), a 5% drop if it agrees a free trade deal, and an 8% drop if Britain leaves the EU without a deal and reverts to trading on World Trade Organisation (WTO) terms.

The initial leak of the analysis, to website BuzzFeed, sparked claims from Tory Brexiteer Jacob Rees-Mogg that civil servants were "fiddling the figures" in order to influence Brexit policy.

The British government has distanced itself from the 'draft' forecasts, which MPs have now been allowed to read in full on a confidential basis, while ministers have insisted the analysis does not take into account domestic policy changes they might take.

Downing Street has also stressed the document does not model the future EU-UK trade relationship the Prime Minister Theresa May is seeking from Brexit negotiations.

A breakdown suggests all regions will see a decline in GDP:

:: less than 1% drop in GDP (EEA membership)
:: 5% drop in GDP (free trade agreement)
:: 8% drop in GDP (WTO terms)

:: 2.5%
:: 6%
:: 9%

:: 1.5%
:: 5%
:: 9%

Northern Ireland:
:: 2.5%
:: 8%
:: 12%

Added costs

The same document claims Britain's retail sector could be hit by a 20% rise in costs after Brexit - while car makers could see a 13% rise in manufacturing costs outside the EU - according to the British government's own internal estimates.

The forecast impact of Brexit on every industrial sector of the British economy, seen by broadcaster Sky News, reveals the estimated added costs to UK companies.

So-called non-tariff barriers as a result of leaving the EU have also been calculated to add as much as 16% in costs in the food, drink, defence and education sectors.

The analysis has been prepared by UK government economists for cabinet ministers ahead of their discussions on future trading relationships with the EU, to be held on Thursday.

The estimated impact of Brexit on the UK's industrial sectors are calculated from the estimated effect of non-tariff barrier costs on British businesses, which will be introduced to UK-EU trade upon withdrawal from the bloc.

Those costs have been expressed in percentage terms as if they were a regular tariff on trade.

The non-tariff barriers include extra customs checks, rules of origin regulations, added paperwork, and diverging regulatory standards.

Essentially, they are a calculation of the "friction" that will be introduced to trade across almost all UK industrial sectors.

The British government no longer promises that post-Brexit trade with the EU - the UK's biggest market - will be "frictionless" after Brexit, instead claiming it will be "as frictionless as possible".

The EU flag is seen outside the British Houses of Parliament in London | File photo

The document, circulated to members of a key cabinet subcommittee due to meet on Thursday, estimates the range of potential non-tariff costs in key industrial sectors.

There will be the equivalent of a rise in costs of at least 2% - but as much as 6% - in the machinery equipment and energy sector.

In the chemical, rubber and plastic sectors the increase in costs is between six and 12%. Other manufacturing is forecast to see a rise in costs of between five and 12%.

The motor vehicle sector is facing non-tariff barriers worth between five and 13% of output. The food and drink sector between eight and 16%.

Agriculture could be hit by extra costs of between eight and 17%, although that could be mitigated by changing regulations and free trade deals with new markets.

Financial services face barriers the equivalent of between five and 10% in added costs, other services from two to 10%.

Construction and business services are calculated to be relatively little affected, by 0% or zero to 6%.