Today the government published its economic analysis of different Brexit scenarios, ahead of the House of Commons vote on the withdrawal deal in two weeks. The Bank of England also published its own economic stress testing. Here are my key take-outs from this and how these may help organisations plan for Brexit. For a full set of charts that illustrate these points, please see my twitter thread here.

First, a couple of health warnings:

  • Some sceptics will question whether any economic forecasts ever turn out to be accurate.
  • Some sceptics will suggest that the report is deliberately designed to show Theresa May’s deal in the most favourable light ahead of the MPs’ vote. 

That said the analysis does broadly match many other economic assessments.


The Bank of England report paints a bleak picture of an economic shock if the UK leaves the EU with No Deal in March 2019:

- GDP reduction of 8-10.5% over five years

- 6.5% inflation

- Bank of England rates rise to 5.5% and consumer and business interest rates peak at 8%

- £ sterling falls by 25%, below parity with US dollar

This ‘No Deal, No Transition’ scenario would lead to a recession in 2019.



This analysis looks at impact on GDP growth over a 15-year period.  It specifically does not look at any short-term effects – such as the economic shock of a No Deal scenario (which the Bank of England has likened to the 2008 financial crash).  It does not model how people and markets may behave.  The figures are for a % reduction in growth rates over that period.

One of the scenarios it models is the ‘July White paper’. This is Theresa May’s ‘Chequers proposals’ which are pretty dead in the water. The ‘political declaration’ agreed with the EU on Sunday specifically falls sort of the Chequers’ aims (eg on friction free customs arrangements and on effectively keeping goods in the single market). So it is fair to discount this scenario.

The paper makes clear that the ‘deal’ agreed with the EU on Sunday could be any number of scenarios: “Given the spectrum of outcomes, and ahead of the detailed negotiations on the legal text, an appropriate analytical approach to modelling the impacts of the Political Declaration is to present a range of possible outcomes”. So it does not – and can not – model the deal on the table (because the deal is far too vague at this stage).


-  A  ‘No Deal’ scenario would have a significant negative economic impact. And all scenarios will reduce GDP growth compared to the status quo. In other words, over 15 years, Brexit  makes the UK worse off than if we stayed.

- the main changes that will reduce economic growth are: controls on immigration (and labour market restrictions), customs administration (the costs of customs documentation and processes for imports and exports with EU), and non-tariff barriers (the regulatory obstacles and costs). 

- Tariffs themselves on average have a lower impact than these three (but bear in mind that for some specific sectors or commodities there are very high tariffs). These are all important areas for business to make plans for mitigating costs. This also underlines the fact that planning for No Deal also assists planning for other scenarios.

- Different sectors are affected to greater or lesser degrees. Services see a relatively consistent increase in trade costs of between 8 – 12 % (except the EEA or ‘Norway’ scenario where costs only increase by 2%). 

- Similarly financial services see increased costs of 9-13% (except EEA which sees only a 1% rise).

- Manufacturing and agri-foods see the biggest difference between scenarios: with anything from 1% (EEA) to3 5% (No Deal) increase in costs for agri- foods and 1 to 13% for manufacturing.

- UK trade will be lower in any Brexit scenario – with total trade volumes down by between 1 to 15%. 

- UK regions are also affected to different degrees, with North East of England, North West and West Midlands seeing the biggest reductions in economic growth.

- All scenarios would hit public finances: increasing public sector borrowing from between £26.6 billion (the ‘white paper’ – or ‘Chequers’ – scenario) to £119.1 billion in a No Deal scenario. Announcing the ‘end of austerity’ may turn out to have been premature.


In practical terms, this analysis helps flesh out what different scenarios look like and will help businesses and other organisations develop an understanding of the impact of different scenarios. They highlight that for business, at macro level:

- Services face increased costs and reduced market access in all the scenarios on the table except the Norwegian model.

- For manufactured goods, the big issues are customs administration and documentation, non-tariff regulatory barriers, and reduced access to labour.

- The wider impact on economic growth will in turn affect consumer spending in the UK

For local authorities and not for profit organisations:

- Access to skills and labour will impact operations and costs

- the wider economic impact will affect fund raising or business rates revenues

- local impact will vary and often depend upon the composition of business sectors.

All organisations should factor the Bank of England scenarios into contingency planning for an economic shock in the UK in the event of a No Deal Brexit in four months’ time.

These points are ones that feature when we work with organisations on Brexit resilience planning. At Grant Thornton we build these into the scenario planning models and methodology we use with clients to develop and refine specific Brexit plans. And with continued uncertainty about the outcome of Brexit, scenario planning and cracking on with No Deal plans remains the prudent course of action.