What About the Bus? Hard Brexit Seen Hurting Health Service

(Bloomberg) -- The U.K.'s health budget could be severely squeezed by a sharp break in ties with the European Union and higher recruitment costs if it can no longer attract workers from the continent, according to the Economist Intelligence Unit.

Britain's annual health spending would be lower by about 7.5 billion pounds ($9.7 billion) by 2021 under a “hard Brexit” than a soft one, the group's report Tuesday showed. That's a scenario in which negotiations break down and the U.K. must depend on World Trade Organization rules starting in 2019, likely leading to a dent in consumer confidence and the value of the pound, the report found.

The U.K. may need to spend 600 million pounds more on imported medicines as the pound would probably fall more sharply, adding to the pressure on the budget, according to the Economist unit. The nation's health spending was about 177 billion pounds last year, or 9.2 percent of GDP, compared with 11.4 percent in Germany and 11.6 percent in France, the group estimated.

The estimates are in stark contrast to promises made by those who led the campaign for Britain to exit the EU. Vote Leave claimed that Brexit would free up 350 million pounds ($508 million) a week for the NHS, even going so far as to emblazon it on the red campaign bus used by leaders such as Boris Johnson. That assertion was widely challenged and discredited by a parliamentary panel and by the Office for National Statistics.

While the major political parties in the U.K. are promising more funding for the country's National Health Service before the June 8 election, their positions on Brexit may turn out to be more significant for the state-funded system, which is already targeting 22 billion pounds in savings, according to the report.

After Saturday's terror attacks in central London, the issue of terrorism has threatened to overshadow Brexit in the final days of the campaign.

To contact the reporter on this story: James Paton in London at jpaton4@bloomberg.net.

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net.