Calculating the Economic Consequences of Brexit

How might Brexit affect the economies of the United Kingdom, Europe, and the United States? This will depend on the outcomes of the ongoing negotiations and decisions made about trade and investment.

This calculator — based on RAND’s After Brexit report[1] — allows users to examine how the negotiations are likely to affect these three economies in the 10 years after Brexit negotiations conclude. It shows the economic effects of the UK’s withdrawal from the EU under five proposed "hard Brexit" scenarios — ranging from complete economic separation with a return to World Trade Organization rules to an Atlantic trade partnership that includes the UK, United States, and remaining European states ("EU27").[2]

This calculator helps users examine the economic implications of specific trade and investment decisions. Using the Custom Scenario option, users can also investigate how outcomes might change under assumptions that differ from those presented in the report. This new scenario can then be compared to each of the others.

Notes on differences in data between this calculator and the After Brexit report

1. The estimates reported in this calculator differ slightly from the estimates reported in the RAND report After Brexit: Economic Implications of Possible Future EU-UK Arrangements and What They May Mean for the United States. As a specific example, this calculator reports an estimated fall in GDP of 4% for the WTO Rules scenario, while the executive summary and chapter 5 of the report state that GDP would fall by 4.9% under this scenario.

The reasons for this discrepancy are as follows:

  • The analytical approach of the online calculator is necessarily simplified, as it is designed to rapidly calculate the economic implications of user-designed Brexit scenarios. The estimates in the report are derived from a computationally intensive general equilibrium model, which provides more precise estimates of the economic effects, whereas the calculator produces first-order approximations of these same results using a partial equilibrium approach.
  • Whereas the main results in the report include only trade-related economic effects, the calculator allows users to also include the economic effects of Brexit-related changes in foreign direct investment.
  • The report's results include the effects from changes in immediate trade costs as well as changes in trade costs over time (e.g., because of regulatory divergence), whereas this calculator includes only the effects from changes in immediate trade costs.
  • In addition to the percent loss in GDP over a 10-year time period, the calculator reports a set of other effects, such as the predicted percent of growth foregone, and changes in the levels of trade and foreign direct investment.

2. This calculator omits the three "soft Brexit" scenarios outlined in After Brexit — the Norwegian model, the Swiss model, and a customs union covering goods — because the negotiating position of the UK government is that it aims to leave the Single Market and customs union when it leaves the EU. Users can explore these scenarios via the “custom scenario,” however. For instance, the Swiss model can be estimated by using the UK-EU FTA baseline assumptions, with the non-tariff values from the WTO scenario for services.

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