Treasury’s Brexit analysis forecasts slower long term growth

The Treasury has published its analysis of the potential long term impact on the economy of the UK leaving the European Union. The analysis has been published in support for the Government’s position that the country should remain inside the EU.

It compares expected long term UK economic growth within the EU against three different scenarios under which the UK joins the European Economic Area (EEA), has a negotiated bilateral agreement with the EU or relies on its World Trade Organisation membership.

The Treasury concludes that following Brexit the UK economy would be 3.4% to 9.5% smaller by 2030 than it would be if the UK remained in the EU. This suggest that average economic growth would be approximately 0.2% to 0.6% less per annum over the next 15 years.

If realised, this would have clear implications for construction. Historically, economic growth of 2% or more has been a pre-requisite (but no guarantee) of increased construction workloads. With the UK economy currently forecast to expand by 2% to 2.2% per annum over the next few years, the Treasury’s claimed loss of growth could have a significant impact on construction.

Whilst the Treasury analysis has focussed on the long term implications of Brexit, there are also likely to be short term impacts on the UK economy and construction. Indeed, political uncertainties ahead of the vote on 23rd June may already be prompting private sector investors to defer decisions.

Glenigan is undertaking and will be publishing shortly its own assessment of the implications for the construction industry of the UK leaving the EU.