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Fri, 3 April 2020

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Boris Johnson's Brexit deal worse for economy than Theresa May's, new analysis shows

Boris Johnson's Brexit deal worse for economy than Theresa May's, new analysis shows
3 min read

Boris Johnson's new Brexit deal will leave Britain's economy worse off than under Theresa May's agreement, according to a major economics think tank.


Analysis by the National Institute of Economic and Social Research estimates that Britain's economy will be 3.5% smaller in ten years' time under the Prime Minister's deal compared to staying in the EU.

Under Mrs May's deal, the think tank estimated that the economy would take a 3% hit over the next decade when compared to remaining in the bloc - meaning Mr Johnson's plan will leave the UK 0.5% worse off than under his predecessor's.

The NIESR, which is Britain's oldest independent economic research institute, put the cost of Mr Johnson's deal at £70bn over the next ten years when compared to staying in the EU.

"We don’t expect there to be a ‘deal dividend’ at all,” NIESR economist Arno Hantzsche said. 

"A deal would reduce the risk of a disorderly Brexit outcome but eliminate the possibility of a closer economic relationship."

The think tank said Mr Johnson's agreement - which opens the door to looser economic ties with the EU than would have been the case under Mrs May's deal - would "hinder goods and services trade with the continent leaving all regions of the United Kingdom worse off than they would be if the UK stayed in the EU".

"We estimate that, in the long run, the economy would be 3.5% smaller with the deal compared to continued EU membership," the NIESR said.

The non-partisan think tank meanwhile said a no-deal Brexit - which now cannot happen before 31 January after Mr Johnson asked EU leaders for an extension - would have seen the UK economy shrink by 5.6%.

And it estimated that GDP would be 2% lower over the next decade if the current "chronic uncertainty" over Brexit continued.

"The economic outlook is clouded by significant economic and political uncertainty and depends critically on the United Kingdom's trading relationships after Brexit," the NIESR said.

"Domestic economic weakness is further amplified by slowing global demand."

The analysis comes after Chancellor Sajid Javid defied calls from MPs to publish the Treasury's economic analysis of the new agreement.

In a letter to the Treasury select Committee, the Cabinet minister argued that the impact of the deal "cannot be measured solely through spreadsheets".

Mr Javid wrote: "My starting point is that agreeing the Withdrawal Agreement is self-evidently in our economic interest. It would bring an end to the damaging uncertainty and delay of the past years, and allow businesses to get on with taking decisions, including around recruitment and investment."

That led Labour to accuse the Government of "flying blind", while the chair of the powerful cross-party committee blasted the "dearth of relevant economic analysis on which MPs can decide how to vote".

Shadow Chief Secretary to the Treasury Peter Dowd, said: “This detailed analysis confirms that Boris Johnson’s deal could leave the UK £70 billion worse off, punching a hole the size of Wales in the UK economy.

“This disastrous deal will result in a huge gap in our public finances, creating a breeding ground for more Tory cuts."

Liberal Democrat Brexit spokesperson, Tom Brake, added: "The Tories' obsession with Brexit at any cost puts our future prosperity at risk.

"It is unconscionable that any Government would voluntarily adopt a policy that would slow economic growth for years to come. Boris Johnson’s eagerness to push for such a damaging deal is shocking."

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