‘Customs Union Brexit’ will hit us by £80 billion a year, says new research

Flags waving as as protesters take part in an anti-Brexit rally. Photograph: Matt Crossick/ EMPICS Entertainment. - Credit: Empics Entertainment

There would be an £80 billion hit to national income and a £13 billion cut to money for public services even if we leave the EU with a customs union deal, a report has claimed.

The report by the National Institute of Economic and Social Research (NIESR) says that a customs union deal with the EU would only halve the impact of a no-deal Brexit.

All regions of the UK would end up poorer than if we had simply remained in the EU, said the report.

A customs union deal would still leave people worse off by an average of £800 a year, and could reduce the treasury’s tax revenue by £26 billion.

This is after taking into account savings on the contribution to the EU budget, and on lowered public service costs if immigration is reduced.

Until now, there has been much discussion of a no-deal scenario, but the authors claim this is the first independent report on the impact of staying in a customs union after Brexit.

It comes amidst discussions between Labour and the government about the withdrawal agreement.

READ: Tory MPs could quit over a Brexit deal with Labour, says newly promoted minister READ: Chances of a Brexit deal between May and Corbyn are becoming less and less likelyHowever, the NIESR report suggests that even a ‘Labour Brexit’ would not deliver the “exact same benefits” that the party seeks in its six tests.

While a customs union is seen as a “frictionless” as possible trade relationship, trade would still be hindered by “significant” non-tariff barriers – which would particularly hit the UK’s massive services sector.

The NIESR analysis, which was commissioned by the People’s Vote campaign but conducted independently, looked at how a customs union deal would affect spending decisions facing a Labour or Tory government in 2022 and then in 2027.

The predicted reduction in trade would be felt worse in major cities like London, but any resulting cuts to welfare or or health services “would be likely most to affect people many regions that voted to Leave in 2016, including Wales and the North of England”, said the report.

Labour MP Rachel Reeves, who supports the People’s Vote campaign, said it is a mistake to regard a customs union deal as a “soft option”, let alone as a cure-all.

“The reality that there is no stable majority in parliament or a lasting settlement in the country without this going back to the people in a new public vote,” she said.

Garry Young, director of macromodelling and forecasting for NIESR, said: “Leaving the EU for a customs union will make it more costly for the UK to trade with a large market on our doorstep, particularly in services which make up 80% of our economy.

“This inevitably will have economic costs, with widespread implications.

“We estimate that all regions will be adversely affected and that there will be fewer resources available to pay for public services.”