A "hard Brexit" could undermine the very things driving GDP growth, according to this think tank

 
Mark Sands
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The UK voted to leave the European Union on 23 June. (Source: Getty)

Dramatic new migration barriers in the aftermath of Brexit could hit the UK's prospects for future growth, according to foreign policy experts.

The UK recorded more than double the growth of Eurozone peers between 2010 and 2015, with Chatham House attributing the difference to aggressive monetary policy, rapid interventions into the financial sector and a flexible labour market.

However, it adds that such performance was not possible without openness to foreign capital and labour, warning that a “hard Brexit” risks diminishing the UK's attractiveness to both foreign investors and workers.

Read More: Liam Fox is moving the UK towards a so-called hard Brexit

“If the UK becomes less attractive as an investment destination, and stricter immigration policy causes the labour force to shrink, then it may find it difficult to attract the quantity of foreign capital and labour necessary to keep a domestic demand-driven economy dependent on foreign capital and labour in balance,” the think tank said.

It added that there is a domestic expectation of more protection against globalisation, most notably in the shape of immigration reform, and warned that failure to deliver will trigger a political backlash.

Read More: A hard Brexit could cost up to 75,000 jobs

“At worst, the UK economy could fall prey to protectionism and would suffer as a result. Obviously the UK leadership will want to avoid this, but it finds itself between a rock and a hard place,” Chatham House said.

“A lot of political talent will be needed to navigate past this.”

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