Brexit without EU trade deal to cause 'economic shock': Leaked report

British Prime Minister Theresa May (file photo)

A leaked British Treasury report has warned of “serious consequences” if the UK abandons the European Union without a trade deal.

The report, seen by The Independent, criticizes Prime Minister Theresa May’s plans for sticking to World Trade Organization (WTO) tariffs as an alternative to a comprehensive trade deal, stating it will cause a "major economic shock.”

The study warns that a hard Brexit will have the most negative long-term impact on the British economy, emphasizing that the result would be catastrophic for companies, jobs and food prices.

The document also warns that the WTO option would mean “new taxes on British trade,”  indicating the UK’s privileged access to these markets would be “terminated” and that it “would take years” to strike new trade deals.

The report’s tone is deemed far stronger than that employed in the Treasury's published analysis of Brexit's long-term impact on the economy.

British finance minister, Philip Hammond, speaks in the House of Commons about his tax and spend plans as the country prepares to trigger Brexit, March 8, 2017. (Photo by AFP)

The paper describes the WTO’s coverage of services, accounting for almost 80 percent of the UK economy, as “out of date” and “based on a set of commitments that are 20 years old.”

"It lacks the ambition the UK’s modern economy needs,” the report added.

Brexit supporters have dismissed the Treasury paper as part of “Project Fear,” indicating that any early predictions of an economic crisis had already been disproved by the UK’s performance since the referendum.

Retaining access to the single market has been one of the major worries for UK businesses ever since the country voted to leave the EU on June 23.

According to May, “no deal would be better than a bad deal,” meaning Britain would have to adopt WTO rules if it leaves the EU without an agreement.

Furthermore, a  study by the pro-Brexit group Economists for Free Trade last month found that if the UK removed all import tariffs, the gross domestic product would grow by 4 percent and Treasury receipts by 7.3 percent.

The government has been harshly criticized for the way it is handling Brexit. The new revelations could also hamper its parliamentary bid to overturn a House of Lords amendment that requires lawmakers’ “meaningful vote on the exit deal.”

Despite warnings that leaving the EU would severely damage London’s position as a financial hub, May has promised to begin the Brexit process this month and complete it by 2019.