Cambridge academics have blasted the Treasury over “Project Fear” Brexit warnings

Mark Sands
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Former chancellor George Osborne forecast an immediate recession if the UK voted to leave the EU (Source: Getty)

A series of dire warnings from the Treasury ahead of last summer's Brexit vote have been called into question by academics at Cambridge, who say leaving the EU could halve net migration.

Academics from the University of Cambridge examined official government warnings ahead of the referendum - and said several predictions were “found wanting”.

In an analysis of the short-term consequences of a Brexit vote, the Treasury warned of a year-long mild recession, an economy 3.6 per cent smaller relative to remaining after two years, rising inflation, falling house prices and higher unemployment.

These warnings were labelled as “scaremongering” by former Bank of England governor Mervyn King in the immediate aftermath of the vote.

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But the Cambridge paper said “a more realistic, although in our view still pessimistic, scenario assumes half of the trade loss of the Treasury”.

It adds: “In the milder Brexit scenario there is a two per cent loss of GDP by 2025 but little loss of per capita GDP, less unemployment but more inflation.”

The academics suggested new controls on migration could cause net migration to fall as low as 165,000 by 2020 – equivalent to a 50 per cent drop on the most recent figures.

Under this forecast, average earnings will continue to rise at roughly two per cent, in line with historical performance, while inflation is expected to increase, but remain under control.

“Our equations for earnings suggest that earnings will rise by more than two per cent as employment rates reach a peak in 2017 and especially as migration reduces from 2019,” the paper said.

“The economic outlook is grey rather than black, but this would, in our view, have been the case with or without Brexit,” it added.

“The deeper reality is the continuation of slow growth in output and productivity that have marked the UK and other western economies since the banking crisis.”

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