Archive for June, 2017

Please click here to view article on Noreena’s ITV blog.



Heavy rain is forecast throughout the UK on Thursday.

Conventional wisdom suggests that this would mean fewer people will turn out and that this is bad for Labour as traditionally lower voter numbers results in a more favourable result for the Conservatives.

But is conventional wisdom right?

I have trawled through the academic literature on weather and elections and this is my considered response.

Whilst there have been no detailed academic studies looking at the relationship between rain and turnout at General Elections in the UK (surprising given how interested we are as a nation in the weather), in a number of countries such studies a relationship between rain and turnout has been found to hold.

In the US researchers have found that for each inch of rain turnout falls by about one percentage point.

A similarly negative relationship between rain and turnout has been found in Spain and the Netherlands.

In Sweden, however, no statistically significant relationship has been found to hold between rain and turnout.

Assuming that Sweden is the outlier here – and I think this is a reasonable assumption to make given how used Swedes are to extreme weather conditions and how strong their sense of civic duty is – it implies that on Thursday we should expect lower turnout than if the weather had been better.

(Note: not all experts may agree with my assumption. Professor Stephen Fisher from The University of Oxford, tells me that he’s looked at overall turnout at British elections since 1945 and finds no systematic pattern whereby turnout is lower when the weather is worse).

Traditionally lower turnout favours the Tories – but that claim is one about turnout in general.

If turnout is reduced specifically due to poor weather it’s less clear who it would favour. That’s because it’s unclear as to who is less likely to go to vote in the rain. The old? Or the young?

If the old stay at home, that’s bad news for the Tories, if the young, that’s bad news for Labour.

It’s also interesting to consider some fascinating research looking at the relationship between wind speed and voter preferences in the US and Switzerland.

It found that higher the wind speed, the more the electorate favours candidates whose message stresses safety and the retaining of the status quo.

“Safety and the retaining of the status quo” sounds very much like Theresa May’s “strong and stable “message.

So how windy will it be on Thursday? Looking at the Met Office’s wind map projections for Thursday it looks like there won’t be a significant breeze.

Last updated Tue 6 Jun 2017

What will this election mean for you?

June 7th, 2017 by admin

Please click here to view Noreena’s article in Stlye, The Sunday Times.


My name is Noreena and I have election ennui. It’s not just that this is the third time I’ve been called to vote in 25 months. Even for a cheerleader for democracy like me, this is somewhat excessive. There’s also the feeling — we’ve all seen the polls — that whoever I support, the outcome of this election is already a done deal; an inevitability that, come Friday, the Tories will have won their third election in a row; that whether I’m Team Theresa or not, my single vote doesn’t really matter.

Except it does.

I’m not going to harp on here about the importance of respecting the history of women’s suffrage, although I do believe that glorious respect is due. It is that the purpose of voting is not just to help propel your own team to victory (not that I’m dismissing the pleasure of being on the winning side), it is to make damn certain that whichever party claims the keys to Downing Street is acutely aware that vast numbers of people think differently to them, believe different things, have different priorities.

For democracy to function effectively, diverse voices must be heard. Yet according to the Fawcett Society, some 8m women may not vote at this election. Imagine how things could be shaken up if they did. If we allow men to continue to dominate at the ballot box and in the debating chamber — 71% of MPs in the last parliament were men — it’s only natural that what matters most to men will still be prioritised.

It’s a message I heard loud and clear growing up. My late mother was a renowned feminist activist and champion of women in politics, who stood for parliament herself. “Noreena,” she’d tell me, when I was eight or nine, after I’d reported witnessing a kid being bullied at school or come to her in tears after watching a story about famine in Africa, “speak up for what you believe in. If you don’t, who will?”

Now, to be clear, I don’t believe that certain issues inherently matter more to women, that health and education are de facto female issues, while the more muscular concerns of the economy, taxation and our relationship with the EU are intrinsically male. I happen to care a lot about these, and am still surprised when people assume that the economics professor on the credit card must be my husband. But everyone is different. And women are no more different than men. How much you earn, your age, whether you have children, aged parents, are married, your ethnicity — these will all affect what matters most to you and who you vote for.

Yet if we think about women in the aggregate — the average Jane, so to speak — the reality is that her life is very different to the life of the average Joe. Bluntly speaking, women are less likely to be promoted and more likely to be paid less, to bear the brunt of caring responsibilities, whether for children or elderly parents, and be the greater victims of domestic abuse. This means that if it’s not only your own back you want to watch, but also those of your “sisters”, what each party has to say on these issues really matters.

Most parties, of course, acknowledge that targeting the female vote can pay off. So combing through this batch of election manifestos, I wasn’t surprised to see overt courting of women.

The Women’s Equality Party unsurprisingly leads the pack here, given that its female-focused agenda is written on the tin. Flagship policies include universal free childcare, “fully equal” parental leave, big bucks for social care and more protection for women against discrimination at work. It was heartening to read through 31 pages of policies targeted at women, even if I don’t agree with everything it proposes and recognise its chances of cutting through this election are extremely slim (the combination of a snap election, limited resources and bare-bones infrastructure means it is fielding only seven candidates). But their prospectus did make me wonder how much more women could be valued in our society if all parties had the imagination to think this differently and comprehensively.

The offerings from the three mainstream parties were considerably more femme-lite — paragraphs rather than pages. All three promise to provide some additional free childcare. All three promise to encourage some more paternity leave. All three address, in some way or other, the crisis in care. All three promise some progress on the gender pay gap. But there are significant differences when it comes to the how much, when and how.

As for which other women’s issues make the leading triumvirate’s shopping list, the parties diverge. Among the pledges from the Lib Dems are free sanitary products for girls at school. The Lib Dems are also offering more mental-health funding for pregnant women and mothers, and quotas for numbers of women on company boards. Having sat on corporate boards, I think it’s amazing how far we have to go to achieve gender parity. Among the Tories’ pledges is a commitment to ensure the civil service is more gender-balanced; overseas, a promise to lead on education of girls globally and to fight against the modern slave trade. I was at Davos this year when Theresa May shared, in a private session, her commitment to ending modern slavery. This is clearly an issue close to her heart. Labour’s proposals run the gamut from pledges to deliver a cabinet that is at least 50% female — Justin Trudeau made a similar promise in Canada and delivered — to extra money for female pensioners. It also commits to ensure that workers have equal rights from day one, whether part- or full-time — considering a lot of women work part-time, this could disproportionately benefit them.

These are the obvious hard sells. But how about the political choices that less obviously affect women differently to men? Policies on areas such as Brexit, austerity and the economy? We don’t typically think of these as being gendered. But they are.

Take austerity — it’s a double whammy for women. It hurts them disproportionately because they make up the bulk of the public-sector workforce and, therefore, suffer most when this sector is slashed — 77% of NHS workers are female. Cuts to welfare and benefits freezes also hurt women most because they are poorer in the first place and more likely to be affected by reductions in child benefits: 90% of single parents are mothers. The Lib Dems and Labour have committed to reversing some of the Tories’ welfare reforms.

As for Brexit, it clearly has the potential to create significant female collateral damage. The EU has long been a champion of gender equality and has played a key role in advancing maternal employment rights and ensuring that women are paid equally for work of equal value. It has also been a considerable funder of female causes. Without its pressure and euros, there is a real danger that women’s rights could be significantly eroded. I’ve spoken to many women’s organisations who are worried on this front. And then there’s the fact that women suffer disproportionately in downturns. Most economists believe that in the long-term, Brexit will come at a cost. Which party will minimise this? I’ll leave it to you to make that call.

These are some of the big issues and a few of the ways they affect us. But as we decide who to vote for on June 8 as women, is there something else we should be considering? What about the gender of the candidates on the ballot paper? Has the time come for us to only consider the women on the ballot slip? Or only candidates from parties that are led by a woman? Should gender trump policy and politics? This might sound extreme, but there’s a vast body of research that highlights how much better group decisions are when the group is made up more evenly of men and women; how problems are better solved and more innovative solutions reached when women are at the table, too. More women MPs isn’t just good for women, it’s good for men, too. But while the argument for “picking the woman” is strong, it’s not strong enough. Take it to its logical conclusion and you’d be voting for Marine Le Pen.

If you are choosing between similar candidates, go for the woman for sure, but chromosomes should not override politics and values combined. Especially not now. These are radically uncertain times, of great international instability, environmental peril and technological change. The right leadership matters now more than ever.

So, use your vote wisely, make your voice heard. And when casting your vote, don’t only think about what matters to you: remember there’s a special place in hell for women who don’t help each other.

Please click here to view article on Noreena’s blog.


When interviewed by Jeremy Paxman, the Prime Minister was unambiguous. Time and time again she issued the mantra “no deal is better than a bad deal”.

But is it really?

I get that it’s a strong negotiating posture to make explicit that you are willing to walk away if need be. But no deal means the UK would default to WTO rules. And most economists and trade experts are clear – this would come at a clear cost.

Here are just some of their concerns:

– Under WTO rules countries cannot discriminate between each other. So under the no-deal scenario the EU would have to treat the UK in the same way it treats other countries with which it does not have a free trade agreement. This means it is inevitable we would have to pay higher tariffs than we currently do when we sell our goods into Europe.
– For some sectors these higher tariffs are very significant. In the dairy/agri-food sector we are talking up to 40%. In the automotive and automotive parts sector, up to 10%. These sectors’ costs of production would go up which means that British exporters to Europe would have to either take a significant hit themselves or raise their prices and risk out-pricing themselves.

– The Society of Motor Manufacturers & Traders warns “import tariffs could push up the list price of cars imported to the UK from the EU by an average of £1,500 if brands and their retail networks were unable to absorb these additional costs”.
– Because the WTO limits the amount of agricultural subsidies a country can provide there is concern that if we default to WTO rules we won’t be able to continue paying the level of subsidies to our farmers we currently are.
– The National Farmers Union says: “The impact assessment produced by the University of Wageningen shows that under this scenario [WTO rules alone] with the full abolition of direct support, farm incomes would fall on average by €17,000 (£14,752 per year).”

– Then there are of course a whole host of non-tariff barriers that would come into play were we to default to WTO rules such as having to certify that exports comply with EU rules.
– IFS analysis of an under “WTO rules” scenario suggests trade between the UK and EU would fall between 17% and 29% and GDP by between 2.6% and 3.1%. That would be a loss, at 2016 prices, of between £48.6 billion and £58 billion.
Through an economics lens it’s clear that no deal comes at a cost.

Of course for those for whom taking back control of our borders overrides all else this may be considered a price worth paying.
Last updated Tue 30 May 2017

Please click here to view article on Noreena’s ITV blog.


These are some initial thoughts on some of the key policy announcements in the draft Labour manifesto.

Yesterday we learned about many of Labour’s education plans.

Today we learnt that in addition they propose the scrapping of university tuition fees.

Whilst it’s not clear exactly how much this would cost it’s probably of the order of £11 billion.

Combined with their other education commitments, this would likely max out the revenue they expect to get from increasing corporation tax (£19.4 billion).

With regards the £6 billion extra spending on health they propose, and the additional £8 billion on social care.

First question is, is this enough?

The NHS funding shortfall is predicted to be vastly in excess of £6 billion.

Second, can the proposed increases in health and social care expenditure be covered by the tax increases and cost savings they propose?

They say these will be covered in part by the increases in taxes those earning over £80,000 will pay.

But as no further detail was provided in the draft manifesto on this tax policy, we don’t know yet how much more those earning over £80k will pay and how much this will raise.

And whilst they say that any shortfall will be covered by their plan to increase tax on private medical insurance and halve the fees to management consultants – again how much these would raise was not spelled out in the draft manifesto.

On their proposed borrowing to invest £250 billion in infrastructure over the next 10 years.

If you believe the economy is demand deficient and that such investment will end up boosting productivity, you might well conclude that this is a sensible policy, especially given how low borrowing rates are.

However this will have implications for the deficit which may well worry others.

Finally, the next three points on the debt and deficit seem pretty sensible.
-The additional flexibility Labour are providing themselves on the deficit and debt pledging to eliminate current spending deficit over a rolling five- year timescale
– Lower debt as a proportion of trend Gross Domestic Product (GDP) at the end of each Parliament
– Giving the Office for Budget Responsibilty (OBR) a clear mandate to say if government is breaching rules

But is the fiscal credibility rule overly flexible?

It can be easy for the government to disagree with the OBR’s assessment of the trend.

Whilst the five-year rolling window does not provide much of a current incentive to be fiscally responsible.
Last updated Fri 2 Jun 2017

Please click here to view article on Noreena’s ITV blog.



The Bank of England expects the economy to do slightly worse this year than it forecast, but predicts it will improve next year and in 2019.

They also made no change to interest rates.

There are three important points to note following Wednesday’s announcement:
Compared to the pre-crisis era, the economy on many counts still looks considerably worse.
The Bank’s forecasts’ assumptions about the Brexit effect on the economy – which are based on an average of potential post-Brexit trade scenarios – may of course be very far from what the ultimate Brexit deal looks like. Whilst its assumption that the adjustment to the UK’s new relationship with the EU is “smooth” may of course not be borne out.
One of the Bank’s key judgements is that net trade contributes positively to growth for much of the forecast period. This may or may not be borne out depending on the ultimate Brexit deal.

GDP forecasts are pretty much the same as those made in February. With the economy expected to grow at 1.9% this year, 1.7% next and 1.8% the year after.

Forecasts for this year have been slightly revised downwards. Whilst for next year and the year after they have been slightly revised upwards.

The downward revision for this year is basically because of the squeeze on household incomes which is now being felt given rising inflation/slowing wage growth.
Other indicators such as recent retail data supports that.

Why things look slightly better in the future is largely to do with the Bank’s belief that the global economy will now do slightly better than expected, business investment looks better than expected and that sterling has proved stronger than expected in recent months.

Sterling went up quite a lot between Feb and May – 2.5%.

Inflation is expected to be slightly higher than expected this year. But better than expected back in 2018 and 2019.

This is largely due to the expectation that sterling will remain stronger than expected.

Real income growth is expected to be particularly weak this year – and real wages to fall – as companies hold back from raising wages given Brexit uncertainty.

But is then expected to recover somewhat next year and the year after.

Even so, the bank does stress that real income growth “remains well below past average rates.”

Before the financial crisis it averaged 3% a year, this year it will be only 0.25%.

Compared to the pre-Financial Crisis era (1998-2007), it is clear the economy on several measures is still doing much worse.

Household consumption will grow at less than half the rate of that period (although debt played a significant role in this so wasn’t necessarily a good thing), the rate of growth of both imports and exports is dramatically less, and the growth in real post-tax household income remains significantly lower than its average back then – 0.25% this year as compared to an average of 3% back then.

Interest rates will remain the same – 0.25%.

The markets had expected more dissent amongst MPC members but again only Kristin Forbes voted to raise them.

Expectations are that they continue to remain low, although a potential rate hike to 0.5% by 2020 was flagged, but the bank made clear that were their forecasts not to play out as expected, this may of course change.

Although there has been a slight fall in the savings rate the Bank cautions not to over interpret this given that the ONS has said it is going to revise savings rate data up significantly.
Last updated Thu 11 May 2017


Please click here to view article on Noreena’s ITV blog.



Education was always going to be a big issue at this election. It matters to the electorate.

And the outgoing government’s proposed real terms cuts in school spending per pupil – the first real-terms cut to school spending per pupil since the mid-1990s (implying according to the independent Institute of Fiscal Studies a 6.5% cut in real terms per pupil spending- between 2015 and 2020) had garnered significant criticism not only from the opposition but also parents and schools.

So it wasn’t surprising to see big announcements by both Labour and the Lib Dems on this front today.

Both parties announcing that they plan to spend significantly more on education than the Conservatives, at least as compared to current government plans.

Labour announced that they plan to spend an additional £8.4 billion a year in today’s prices by 2021–22.

Over half (approximately £5.1 billion) will go to schools.

The rest will go towards bringing back the Education Maintenance Allowance, maintenance grants and abolishing fees for adult education courses.

The Lib Dems announced that they plan to invest nearly £7bn more in schools and colleges over the next parliament. (It’s not completely clear at present whether this is per year or in total.)

And will use this to reverse cuts to frontline school and college budgets, protect per pupil funding in real terms and ensure no school loses out from the National Funding Formula.

The Lib Dems didn’t spell out today how their additional spending would be paid for – they said we will get full costings in their manifesto.

But they did give us a clue as to how some of this will be paid for – from a reversal of the Government’s proposed funding for new grammar schools.

Building new grammar schools was going to cost the government £650m in 2021.

More generally they have said that by not leaving the single market, significant funds would be freed up.

Labour was more granular – they said they plan to pay for this by not implementing planned corporation tax cuts and reversing most of the cuts introduced since 2010.

Cuts to corporation tax have been one of the largest and most expensive government policy changes since 2010.

So reversing this would free up significant cash – about £19 billion according to the IFS in the near term.

Today’s announcements raises some important questions:
How many initiatives can Labour fund from their proposed rise in corporation tax?
Whilst their education investments can comfortably be covered by this, their list of additional spending plans is getting pretty long.

What in addition to education they plan to fund from the corporation tax increase is not as yet spelled out.
What is the most likely effect on the economy of an increase in corporation tax?
There isn’t consensus on this amongst economists.

Whilst some argue that that this is likely to have a de facto negative effect on growth, others point out that how it plays out in practice will depend on how the UK’s tax regime compares to elsewhere, what the money is spent on and whether this improves productivity, and how sensitive companies actually are to tax increases.
How much additional funding if any is needed for the education sector?
A matter again of debate.
Should schools be favoured when it comes to spending (as is currently the case) rather than other forms of education such as further education and six forms which have been hollowed out over the last 20 years?
For now when it comes to education it’s the opposition parties who have laid down the gauntlet.

It will be interesting to see how the Conservatives substantively respond.

Last updated Fri 2 Jun 2017

Please click here to view article on Noreena’s ITV blog.


Forty-seven years after the Equal Pay Act women in the UK still earn on average 18.1% less than men.

Today, new regulations come into place that make it mandatory for firms employing over 250 people to disclose their gender pay gap – that’s over 9,000 companies and will affect about half of the workforce.

It’s a significant milestone in the amble towards gender equality. (Well, it’s hardly been a march, has it?!) But is it enough?

Many firms are unaware of the full extent of their gender pay discrepancies – having never audited their salaries through a gender lens.

The hope is once they become aware of any differences they will seek to remedy matters, especially given that their gender pay gap will be publicly available for all to see.

The smartest companies realise that there is a diversity dividend beyond the aversion of bad publicity.

Companies are more likely to be able to attract the best employees if they are seen to be sensitive to gender pay differences.

For Generation K – the generation just entering the work force – gender equality matters a lot.

Meanwhile for consumer-facing brands, especially those targeting younger people, there is a potential gain for being seen to be truly gender equal and a potential loss if they are seen to be not.

There’s also a vast body of academic research that it makes clear that bringing more women into senior management pays off.

In a recent study of 22,000 companies in 91 countries it was found that companies with over 30% female senior executives make on average 6% more profit than those with fewer women at the top. And the more women you have in senior management, the smaller your gender pay gap will be.

I asked FTSE 100 CEO Peter Harrison whether he thought there was a business case for more diversity at senior levels of his business. His answer was unambiguous: he sees it as “mission critical”.

Schroders, which he runs, was one of the first FTSE 100 companies to publish their gender pay gap ahead of today’s regulations coming into effect. Whilst theirs is big – 33% – this is actually less than the industry norm and Harrison is committed to shrinking it.

The danger is that not all businesses or sectors will see the value in closing the gap and that the market on its own will not modify the practices of those that don’t.

Today’s regulatory changes have no enforcement mechanisms, which means that companies can just ignore the findings.

Should the government come down harder on businesses? Many think it should.

The Business, Energy & Industrial Strategy cross-party committee of MPs recommended this week that 50% of senior executives of listed companies should have to be female by 2020.

I support the ambition of the goal, but worry about this time frame. In some sectors such as finance and tech there arguably isn’t the pipeline of female talent yet in place.

A 33% target by 2020 seems more achievable. But a 50% target by 2025? Hell yes, with penalties imposed on non-performers.

Of course, solving the gender pay gap isn’t only about more women getting to the top of organisations. It’s also about ensuring that women and men are paid equally for equal jobs.

It’s illegal not to do so – but in practice companies persist in undervaluing women.

Discrimination lawyers I spoke to this week had a vast number of examples to share. Providing legal aid for women to take employers to court in such instances could be another welcome step.

Alternatively, the UK might want to take a leaf out of Iceland’s book.

It is currently contemplating legislation that would make employers have to prove they offer equal pay to employees, thereby shifting the onus onto business to deliver.

Properly funded incentives for fathers to take up parental leave – at present too many fathers simply can’t afford to take time off work instead of their partners because they earn more – would also make a difference.

Alongside that we need corporate cultures to change so that men feel they can take time off to care without being penalised in terms of future promotions.

Fixing the gender pay gap isn’t just the responsibility of employers and governments. Women also need to get better at arguing the case for being paid more. If you don’t ask you’ll never get.

But I don’t underestimate how hard this is if one’s bargaining position is weak – not everyone can “lean in” and expect a positive outcome.

For anyone reading this who thinks that the gender pay gap is a women’s issue and so not relevant to them, let me be clear – it’s not.

PwC has estimated that the UK would be £85 billion better off if the gap was no more.

We’d all benefit from that – whatever our gender.

Last updated Thu 6 Apr 2017


Please click here to view article on Noreena’s ITV blog.


A raft of tax and benefit cuts come into play this week – several of which are the legacy of George Osborne.

The combined cuts are estimated to cost the government £1 billion this year (the government loses £2bn from tax cuts but gets £1bn from its welfare cuts).

So who benefits?

The Resolution Foundation has crunched the numbers, analysing the impact of these combined measures on different income groups given the inflationary environment we now experience.

Now they have shared their findings with me.

Assuming their number crunching is correct (their figures include the National Living Wage) it’s a story of the richest half of society becoming better off and the poorest third worse off.

Those with children will be particularly hard hit.

The impact of many of these changes will of course be being magnified by higher inflation – currently running at 2.3% – which will hit the poorest in society this year in two ways:

Their benefits in real terms are worth less (because of the freeze) and their cost of living is going up.

In November last year Iain Duncan Smith warned about this and said the government should reconsider the freezes as a result.

As yet they haven’t.
Last updated Wed 5 Apr 2017


Please click here to view article on Noreena’s ITV blog.



Today the British government triggers Article 50 which formally starts the process of leaving the EU.

What this means is that the ticking clock starts – the UK now has a two-year period to both decouple from the EU and agree a new trade deal.

If you like certainty, if you’re the kind of person who likes knowing what lies ahead, this next two years isn’t going to sit well with you.

Because what the ultimate new deal will look like, how different sectors will be affected, what this will mean for your business and your customers’ businesses, what this will mean for your EU national employees operating in the UK are all questions that at present we cannot answer.

All we know so far is that the Prime Minister plans for us to:
– Exit the single market
– Is seeking special sector by sector customs arrangements with the EU
– Plans to conclude the negotiations within the two year period

Over the past few months, at Davos, in London and other European capitals, I have spoken with a number of European Finance Ministers, prime ministers, former and current trade negotiators.

All of whom expressed skepticism that the Prime Minister would pull this off.

The notion that we can cherry pick our customs arrangements, whilst at the same time pursuing bilateral free trade deals with the rest of the world – is viewed as unrealistic.

As for the two year timetable – those I have spoken to say it is simply impossible.

Remember we have to first decouple from the EU, agree a host of issues such as how our collective security will now work, agree what we will still pay for, what our divorce bill should be etc etc.

That is before we even get to negotiate the Brexit trade deal – a process which itself may take a couple of years.

And then all 27 EU members need to approve the deal before it is ratified – a process which itself is not going to be straightforward given the different interests at stake.

Some countries trade significantly with the UK, and so will want to make this as pain-free for the UK as possible – but others don’t.

Several face anti-EU populist moments at home that they will want undoubtedly to send a message of zero tolerance to.

Whilst the fact that France and Germany are in campaigning mode, with elections looming in both, will clearly affect the tone of the negotiations and of course depending on who is elected, the ultimate outcome.

It’s simply impossible to predict with certainty how long it will take for us to agree a new trade deal with the EU.

When I met with Pascal Lamy, the former Head of the World Trade Organization, last week, he said he thought that four to six years is realistic.

What kind of transition arrangement we might be able to agree in the interim is still unknown.

As for how the negotiations will ultimately play out? Impossible to know in advance.

But what is clear is that during the negotiation process every grumbling and rumbling from Brussels and negotiators has the potential to move the market and spook investors.
Last updated Thu 30 Mar 2017

Please click here to view Noreena’s article on her ITV blog.

A comprehensive post-Brexit trade deal could take up to six years to negotiate, the former head of the World Trade Organisation (WTO) has told ITV News.

Pascal Lamy also warned that failing to agree any deal before Britain’s EU exit will only hurt consumers.

He said the cost of goods and services would sharply rise if Prime Minister Theresa May upholds her pledge that “no deal is better than a bad deal” once the formal two-year exit talks end in spring 2019.

The UK government, which is due to trigger Article 50 at the end of this month to begin negotiations, has targeted a “good deal” within the two-year timeframe.

The failure to agree a deal would see Britain forced to adopt so-called ‘WTO rules’ with punishing tariffs until a new arrangement was finalised.


“WTO rules do not provide as good a trade regime as a bilateral deal, like the one that we should or could have between the EU and the UK,” Mr Lamy said.

He played down Mrs May’s ‘no deal’ pledge as an attempt to flex Britain’s negotiation muscles that was typical of the tough talk before trade deals.

“I’ve been in trade negotiations for 25 years of my life and I’ve heard this notion that no deal is better than a bad deal probably about 500 times,” he said.

Mr Lamy said the government’s hope of walking away with a strong trade deal after the two-year exit negotiations was simply unrealistic.

“These agreements are long to negotiate,” he said.

“An ambitious trade agreement – like the one we should have been the United Kingdom and the European Union – will probably take four, five, six years to negotiate.”

Last updated Tue 28 Mar 2017