Economists: Burnley residents will be £870-a-year worse-off under customs union Brexit

Career politician and Brexit Party leader, Nigel Farage, on The Andrew Marr Show.
Career politician and Brexit Party leader, Nigel Farage, on The Andrew Marr Show.

Burnley residents will be more than £870-a-year worse-off if Britain leaves the EU in a customs union Brexit, according to a new report by the National Institute of Economic and Social Research.

The independent NIESR study outlines the harsh economic impact that will accompany a customs union Brexit, predicting that the UK’s national economy would shrink by 3.1% over the next decade compared to remaining in the EU, meaning that the total hit for the country would be around £80bn with the areas which voted Leave in the 2016 referendum set to be the hardest hit.

While the dire economic forecasts reveal that on average everyone in the UK will be at least £800-a-year worse off, the predictions for Lancashire show that the region's economy would shrink by 2.9% - some £1.3bn - over the next decade, translating to a loss of £872 per person when calculated across the current population.

“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," said Garry Young, Director of Macromodelling and Forecasting for NIESR. "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," Garry added. “Regional effects are driven by a range of factors, including the local industry composition, the size and flexibility of local markets, and the intensity of trade with the rest of the EU.”

Supposedly desperate to find a compromise, Government and Opposition Ministers continue to meet to discuss the matter, with a customs union being Labour’s preferred option as staying in the EU customs union would mean that the UK and the EU would agree not to impose any charges, or tariffs on each other’s goods.

Commissioned by the People’s Vote campaign to explore the dangers of some of the more extreme right-wing Brexit options being pedalled by prominent politicians, the NIESR report is the first independent study of its kind and assesses the projected impact of changes to trade, investment, and immigration that will come to fruition as a result of leaving the EU.

A customs union deal would dramatically impact the spending decisions of future governments, cutting the amount of money available for public services by £13bn a year - a shortfall which would need to be met by an increase in the basic rate of income tax of around 2.5p on the pound, higher public borrowing, or further public service cuts.

Ironically, economists predict that if the revenue shortfall was met by cuts in welfare or health care, then the biggest impact of such cuts is likely to be on areas that voted leave in 2016.