Brexit economic hit will be gradual not instant, Lord Mandelson warns

The former business secretary said the Remain campaign had given a mistaken impression

Lord Mandelson at the business committee (House of Commons)

The negative economic effects of Brexit will happen gradually rather than in one big hit, a former business secretary has said.

Lord Mandelson, a central figure in New Labour who served under the last Labour government, said the EU Remain campaign was “mistaken” to suggest there would be a single big economic hit from leaving the bloc.

He warned that Brexit was “the elephant in the room” when it came to industrial policy and said exit from the single market would intensify problems for business caused by leaving the bloc.

“If in the long term businesses are facing border tariffs, customs barriers, frictional cost and regulatory disruption and interruption of trade you are risking a very severe deteriorating in the UK business environment,” he told the House of Commons business committee on Thursday.

“This deterioration is not going to happen straight away. That was the mistaken impression, in my view, given in the referendum.

“It will be a gradual, inexorable worsening of conditions in the UK. That’s why people saying it all seems to be going OK so far are missing the point – it hasn’t even kicked off yet.

“There are basic choices, hard or soft, which must be got right first. If we get Brexit wrong I don’t think industrial strategy in itself will be able to correct the consequences of a hard Brexit.”

He added: “We can either separate ourselves as fast and as far as possible from the EU and the single market – what’s called a hard Brexit – or minimise the break and the resulting risk to the UK economy. I’m in the second camp, I want to maximise our continued participation in the single market.”

The Government says it wants to secure the “best possible access” to the single market – after it has restricted the freedoms of EU citizens to move to the UK.

Brexit Secretary Davis Davis has previously said the UK would likely leave the single market, or that it could pay for access to it.