"We estimate the long-run cost of leaving the EU on the government’s preferred deal to be roughly equivalent to losing the annual output of Wales."
If the government’s proposed Brexit deal is implemented, long term GDP will be around 4% lower than it would have been had the UK stayed in the EU, according to analysis by NIESR.
A 4% drop in GDP is roughly equivalent to losing the annual output of Wales or the output of the financial services industry in London.
The figure also equates to a loss of 3% in GDP per head, worth around £1,000 per person per annum to people in the UK.
NIESR estimates that even if the UK were to stay in a customs union with the EU, or if the Irish backstop position was to be invoked, there would still be a 2% hit to GDP per capita.
The Institute added that even if the deal is implemented, there will continue to be uncertainty about the precise shape of the future relationship beyond the transition period ending on 31 December 2020.
Its report states: "Recent estimates, based on the UK’s performance relative to other similar economies, suggest that Brexit uncertainty has already reduced UK GDP by about 2% relative to what it would have been if the UK had stayed in the EU. This uncertainty is a consequence of the 2016 referendum result."
NIESR concluded that the estimates themselves are "uncertain as there is no historical precedent of a country leaving a major trading block such as the EU".
Experts at the Centre for Economic Performance at LSE, King’s College London and the IFS also released research today on the economic and fiscal consequences of Brexit. They estimate that the Brexit deal negotiated by the Prime Minister could reduce UK GDP per capita ten years after Brexit by between 1.9% and 5.5%, compared to remaining in the EU.
Garry Young, director of macromodelling and forecasting at NIESR, said: "Leaving the EU will make it more costly for the UK to trade with a large market on our doorstep and inevitably will have economic costs. We estimate the long-run cost of leaving the EU on the government’s preferred deal to be roughly equivalent to losing the annual output of Wales."