The UK will be economically worse-off outside of the EU under most plausible scenarios, according to economic analysis.
Whether Brexit is judged to be success or not will depend to some degree on its economic impact, according to the influential US thinktank the Rand corporation.
Much of the debate around Brexit has been focused on a 'hard' or 'soft Brexit', which relates to whether the UK should leave the Single Market and the Customs Union.
However, there are a range of different trade opportunities and arrangements that could happen between the UK and European Union, and other countries, such as the U.S., post-Brexit.
The chosen trade arrangement will largely depend on the UK's negotiations with the EU.
'No deal'
Rand has explored eight plausible post-Brexit trade scenarios involving the UK, EU and U.S. after Brexit.
Game theory insights were also used to create a better understanding of how a variety of factors might affect the outcome of Brexit negotiations.
The UK is likely to be economically worse-off outside of the EU under most plausible scenarios, particularly if the UK leaves the EU with no trade deal.
This would reduce future GDP by around five per cent over ten years, which is a loss of $140 billion. Under WTO rules, the EU would also lose out economically, but nowhere near the same proportion as the UK — about 0.7 per cent of its overall GDP, which is $97 billion.
Indeed, the British farming industry has stated its worry of the catastrophe a ‘no deal’ scenario and moving to WTO ‘most-favoured nation’ status would bring, severely impacting the industry's ability to trade.
One report has concluded that a ‘no-deal’ outcome would lead to a collapse in trade, with a 90% drop in beef exports and 53% drop in lamb exports from the UK to the EU.
UK-EU-US agreement
The Rand says it is in the UK's best interests to achieve some sort of open trading and investment relationship post-Brexit.
The most beneficial trade scenario would be a trilateral UK-EU-US agreement, but this is seen as very unlikely in the current political environment because President Donald Trump does not approve of the Trans-Atlantic Trade and Investment Partnership (TTIP).
Under this scenario, UK GDP would be 2.2 per cent higher – or 7.1 percentage points better – than under the WTO rules scenario.
The report says this scenario would make the UK better off compared to its current membership with the EU.
But farmers are wary that this scenario could flood Europe, and the UK, with cheaper, sub-standard produce, which will have a big impact on British farm incomes and food safety.
Overall, the thinktank says it is in the best interests of the UK, and to a lesser extent the EU, to work together to achieve some sort of trade deal post-Brexit.
