Brexit will provoke ’paradigm change’ similar to 2008 crash, Davis tells MPs
Leaving the EU will provoke a "paradigm change" in the UK economy in a similar way to the financial crash of 2008, Brexit Secretary David Davis has told MPs.
Mr Davis said that in such circumstances, any assessment of the potential impact of the change on various sectors of British industry using existing economic models would not necessarily be "informative" about the likely outcome.
The Brexit Secretary confirmed that no impact assessments had been conducted by the Government on the likely results of Brexit for individual sectors, such as automotive, aerospace or financial services.
Instead, officials will "at some stage" during the forthcoming second phase of Brexit negotiations, dealing with trade, conduct work to quantify the effects of different possible outcomes, such as a free trade agreement with the EU or moving to World Trade Organisation rules, he said.
But the chairman of the House of Commons Exiting the EU Committee, Labour MP Hilary Benn, described the decision as "rather strange" when ministers were hoping within weeks to enter into a fundamental renegotiation of Britain’s trade relations with the rest of Europe.
"You have said there are no impact assessments," said Mr Benn.
"You were hoping that at the October (European) Council, the door would be open to phase two of the negotiations, where the question would be asked ’What does the UK Government want?’
"Are you actually telling us that the Government hadn’t at that point - and still hasn’t - undertaken the assessment?"
Mr Davis, who was appearing before the Committee to defend his refusal to hand over full details of the Government’s analysis of the economic impact of Brexit, said that assessments had never been carried out in the form suggested when Parliament demanded their release.
"You don’t need to do a formal impact assessment to understand that if there is a regulatory hurdle between your producers and a market, there will be an impact," he told the committee.
"It will have an effect, the assessment of that effect is not as straightforward as people imagine.
"I’m not a fan of economic models because they have all proven wrong. When you have a paradigm change - as happened in 2008 with the financial crisis - all the models were wrong. The Queen famously asked why did we not know.
"Similarly, what we are dealing with here in every outcome - whether it is a free trade agreement, whether it is a WTO outcome or whether it is something between that on the spectrum - it is a paradigm change.
"We know not the size, but the order of magnitude of the impact."
Mr Benn asked him: "Doesn’t it strike you as rather strange that the Government undertakes impact assessments of all sorts of things all the time, but on the most fundamental change that we are facing as a country, you’ve just told us that the Government hasn’t undertaken any impact assessments at all on the implications for various parts of the economy?"
Mr Davis last week gave the committee 850 pages of what he terms "sectoral analyses", looking at the condition of various parts of the UK economy and their current involvement in the EU market but making no forecasts on the likely impact of Brexit.
MPs complained that the material had been heavily edited by officials before being released to them, with some suggesting the Brexit Secretary could be in contempt of Parliament for failing to respond adequately to its demand.
