For months, British moderates held out hope that they could cut a special deal with Brussels to retain access to the European Union's single market while imposing stiffer immigration controls.
E.U. officials, however, made it clear that Britain couldn’t cherry pick the best of both worlds. Faced with a stark choice, Prime Minister Theresa May has taken a leap into the unknown.
Ms. May on Tuesday announced Britain’s intention to exit the E.U. single market in order to regain full control over its immigration policies, the so-called hard Brexit.
Britain has made a clear political choice that carries uncertain economic consequences. The projections by British government officials and European economists, however, don’t look encouraging.
The House of Lords, the upper house of the British parliament, is still holding out hope that Britain can avoid a complete break with the European Union.
In October, Britain’s chancellor of the exchequer, Philip Hammond, estimated that leaving the E.U. single market would result in a 9.5 percent contraction of Britain’s gross domestic product over 15 years.
Britain could lose €73 billion ($78 billion) in tax revenue, Mr. Hammond said. That figure takes into consideration savings from Britain’s E.U. budget contributions, which stood at nearly €5 billion in 2014.
In Brussels, the Center for European Economic and Policy Studies has estimated that in the best cast scenario a hard Brexit would result in 1.2 percent less economic growth by 2030. In the worst case scenario, it would result in 3.2 percent less economic growth.
The estimates do carry a silver lining. Daniel Gros, the director of the center, warned that the projections are not very reliable.
Meanwhile, the House of Lords, the upper house of the British parliament, is still holding out hope that Britain can avoid a complete break with the E.U.
Members of its special committee on E.U. affairs are travelling to Strasbourg, seat of the European parliament, this week in an effort to build relations with E.U. parliamentarians in the run-up to the Brexit negotiations.
Ruth Berschens heads Handelsblatt's Brussels office, leading coverage of European policy. To contact the author: [email protected]