Yet again, listeners to the Today programme awoke this morning to hear a dire forecast for the economic consequences of leaving the EU – with no critical analysis nor even explanation of how the forecast was arrived at.
This morning’s horror story came courtesy of the National Institute for Economic and Social Research (NIESR), a think tank which claims the economy will be 3.5 per cent – or £70bn – smaller in 10 years’ time than if we had never voted to leave the EU.
The NIESR claims the economy is already 2.5 per cent smaller than it would have been had we voted to remain in 2016 and that this loss will last ‘in perpetuity’.
Well, there it is. Given that it comes from what the BBC would likely regard an ‘expert’ source, the figures cannot of course be questioned. They are fact and that it that.
Except no, they are not fact. They are guesswork, built on presumptions which reflect the prejudices of the forecasters when they built their models.
There is a very straightforward reason why forecasts by the NIESR and others keep coming up with negative economic forecasts for post-Brexit: they are only analysing negative outcomes and make no allowance for the possibility that leaving the EU could in any way boost the economy through such things as an increase in trade with non-EU countries or the potential deregulation of the UK economy.
This paper from 2016 explains in detail how the NIESR built its model for forecasting the economic consequences of leaving the EU. It set out to measure just three things:
Firstly, the effect of a reduction in trade with other EU countries under various scenarios.
Secondly, the decrease in foreign direct investment which would result form our departure from the single market.
And thirdly, the reduction in our budget contributions to the EU.