Disorderly Brexit risks crippling UK economy OECD warns

British MPs today tore into warnings from a Paris-based think-tank that Brexit could cripple the economy as ‘the return of Project Fear’.

The Organisation for Economic Co-operation and Development (OECD) said holding a fresh referendum to stay in the bloc would be ‘positive’ for UK business.

And it’s secretary general, Angel Gurria, compared Brexit to the Blitz of the Second World War.

But a string of MPs slammed the assessment saying it is yet another example of Brexit gloom from an organisation hellbent on talking down Britain’s economy.

And a Government spokesman hit back at the report and said: ‘We are leaving the EU and there will not be a second referendum.’ 

The OECD was forced into a humiliating climbdown in March when it upgraded its economic forecast for the UK after overestimating the negative impact of Brexit. 

A list of other dire predictions of about how the British economy would cope after the referendum have been torn up as businesses outperformed gloomy forecasts.

Chancellor Philip Hammond, pictured today at the launch of the OECD report, said the government wants a transitional deal to ensure there is no Brexit cliff edge  and protect businesses

Peter Bone, Tory MP for Wellingborough, said the Parisian organisation is trying to ‘interfere’ with British politics. 

He told the Mail Online: ‘Britain is the fifth biggest economy in the world, we have everything going for us if we come out of the EU.

‘The government is going to publish its plans for what a no deal Brexit will look like which is what we should do.

‘The idea that this would be a catastrophe or the end of the British economy is yet another example of project fear.

‘This organisation shouldn’t say things which aren’t true. They are trying to interfere with British politics which is pretty poor show on their part.’ 

While fellow Brexiteer Jacob Rees-Mogg, the Tory MP for North East Somerset told the Mail Online: ‘The OECD is a leading advocate of Brexit pessimism that has made a series of politically motivated and erroneous forecasts.’

Eurosceptic Tory MPs Peter Bone (pictured left) and Jacob Rees-Mogg (pictured right) both hit out at the report – saying it is yet another example of ‘Project Fear’

Andrew Bridgen, Tory MP for North West Leicestershire, told the Mail Online EU German manufacturers and French farmers have more to lose from a no deal Brexit than Britain.

He said: ‘It would be a catastrophe for German manufacturers. The OECD should be urging the EU to move the negotiations on to trade talks.

‘We buy more from the EU than we sell to them.’

And he slammed the think-tank for ‘trying to interfere in a sovereign democratic decision’ by suggesting Brexit could be reversed. 

MAY FAILS TO WIN A BREAKTHROUGH AT JUNCKER DINNER

Theresa May bids goodbye to Jean Claude-Juncker after their dinner. Her last-minute dash to Brussels failed to secure a breakthrough in Brexit talks

The Brexit standoff deepened today after Theresa May failed to win a breakthrough at a Brussels dinner with Jean-Claude Juncker.

A key ally of Angela Merkel made clear the UK will have to write a big cheque to unblock the negotiations, insisting: ‘There are a lot of things to be paid.’

The comments from German politician Michael Fuchs came as tensions rose again despite the PM’s bid to win over the EU commission president last night.

After a frenzied round of diplomacy aimed at unlocking the negotiating stalemate, Mrs May had hoped Mr Juncker could help end the impasse.

But the discussion over a meal in Brussels seemed to produce little more than warm words about ‘accelerating’ negotiations.

Meanwhile, Chancellor Philip Hammond underlined the mounting anger with the EU’s tactics.

He complained about the ‘silly’ obsession with settling the divorce bill before moving on to trade talks.

While Tory MP Shailesh Vara (North West Cambridgeshire) told the House of Commons some organisations are trying to scaremonger.

He told MPs: ‘Those who threaten economic Armageddon if we leave the EU without a deal are effectively engaging in Project Fear Two.

‘Project Fear One did not materialise and there is a possibility that Project Fear One will not either.’

The OECD said the uncertainty of Brexit negotiations is likely to leave the UK without a free-trade agreement with the EU when we quit the bloc in March 2019.

It also claimed Britain’s economic prospects could be further hit by a ‘disorderly Brexit’ if negotiations between the EU and UK are cut short.

It said if Britain leaves with no deal it could trigger a sharp reaction by financial markets, sending the exchange rate to new lows and leading to a downgrade in the UK’s sovereign rating.

In a gloomy assessment, the think-tank warns: ‘Business investment would seize up, and heightened price pressures would choke off private consumption. 

‘The current account deficit could be harder to finance, although its size would likely be reduced,’ the report warned.’

And the OECD suggested the UK could avert the economic risks if it goes back on last year’s historic referendum and stays in the EU. 

It states: ‘In case Brexit gets reversed by political decision (change of majority, new referendum, etc), the positive impact on growth would be significant.’

Mr Gurria, OECD chief, compared the challenges of Brexit to the Blitz.

He said: ‘It’s [Brexit] going to work, you are going to make it work.

‘The only question is how long will it take? Are there costs attached? Yes there are, yes there will be.’

He added: ‘What was that thing Churchill said – stay calm and carry on. This is like the Blitz except fortunately not the Blitz.’ 

But the think-tank also admitted that quitting the bloc could ‘prove more favourable’ than assumed in its report and that it could boost trade and growth.

It said this would require ‘an ambitious EU-UK agreement and a transition period to allow for adjustment to the new agreement’.

It added: ‘Meantime, however, uncertainty could hamper domestic and foreign investment more than projected and hurt consumption even more were the exchange rate to depreciate further.’ 

Speaking today, Chancellor Philip Hammond said Britain is committed to getting a good Brexit deal which avoids a ‘cliff edge’ for businesses.

He said: ‘The government is clear that we….want a special partnership with the EU maintaining close economic ties after we leave the union.

Theresa May and David Davis  jetted out to Brussels yesterday to hold talks with Jean-Claude Juncker to try to unblock Brexit talks and move them on to discussing a future trade deal. The Prime Minister has warned EU leaders that Britain will go for no deal rather than get a bad Brexit deal

‘We know that by allowing a time-limited transition period to avoid a disruptive, cliff-edge exit form the European Union we can provide that certainty for businesses up and down the UK and the EU.’

The report also warns that productivity is lagging behind in Britain and has made ‘no meaningful contribution’ to UK output since 2007.

The report highlighted that labour productivity was also weakest outside of Greater London and the South East of England.

This kind of disparity between regions and workers ‘may lead to, or be the result of, important differences among people in terms of income and wealth, jobs and earnings, and education and skills.’ 

Responding to the OECD report, a spokesman for the Treasury said: ‘Increasing productivity is a key priority for this Government, so that we can build on our record employment levels and improve people’s quality of life.’

As Chancellor before the EU referendum vote, George Osborne got the Treasury to pump out a series of dire predictions about Britain’s economic prospects outside the Brussels club.

But the gloomy predictions failed to materialise as British business continued to boom and outperform the forecasts.

HOW MYSTIC GEORGE OSBORNE GOT IT SO WRONG ON BREXIT

Claim: A vote to leave ‘would cause an immediate and profound economic shock’ which would ‘push the UK into recession’. Treasury analysis claimed the economy would ‘fall into recession, with four quarters of negative growth’.

Reality: False. The UK’s economic growth has remained positive for every quarter since the referendum, with Britain finishing the year as one of the fastest growing economies in the G7.

Claim: Unemployment ‘would increase by around 500,000’ in the wake of a Brexit vote.

Reality: False. Britain’s employment rate has risen since the referendum. In the three months to January, unemployment fell to 4.7 per cent – the best rate since 1975.

Claim: A Brexit vote ‘would immediately lead to an increase in the premium for lending to UK businesses and households’.

Reality: False. The Bank of England responded to the referendum result by cutting interest rates to a historic low of 0.25 per cent, where they have remained.

Claim: Trading partners, including the US, are already negotiating with the EU. ‘Before they start negotiations with the UK they are likely to want those deals to conclude.’

Reality: False. The new US administration has indicated it will not proceed with a planned EU-US trade deal, but has said the UK will be ‘first in the line’ for a bilateral deal.

Claim: A Brexit vote would lead to ‘a reduction in foreign investment’.

Reality: Likely to prove false. Investment figures for 2016 have not yet been published, but there have been a number of big foreign investments since the referendum.

Claim: Britain would ‘lose preferential access to 53 markets’ with which the EU has trade deals, and these would ‘take years to renegotiate’.

Reality: Likely to prove false. Theresa May has said there is no reason why the UK cannot continue with the existing trade deals. Countries such as Mexico and Canada have said they want to strike quick trade deals with the UK.

Claim: A vote to leave ‘would have an impact on our ability to affect the EU’s decision making’.

Reality: True. Ministers accept that the UK will not be at the table when Brussels draws up new regulations after Brexit. 

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