British Prime Minister Boris Johnson’s Brexit deal would hurt the nation’s economy more than further delays and continued uncertainty about leaving the EU, a UK think tank said yesterday.
Johnson late on Tuesday won parliament’s support for an election on Dec. 12 that he hopes will break the Brexit deadlock and lead to the approval of the deal he clinched with Brussels earlier this month.
Johnson has said his deal is the only solution to the uncertainty that has weighed on the economy since the 2016 referendum.
By contrast, the opposition Labour Party wants to negotiate a new deal and put it to a second referendum, which could overturn 2016’s result.
Johnson’s Brexit plan opens the door to much looser economic ties between Britain and the EU.
The National Institute of Economic and Social Research (NIESR) said that the economic cost of a more distant relationship would outweigh the gains from ending Brexit uncertainty.
“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.”
Johnson’s proposed deal would leave the country ￡70 billion (US$90 billion) worse off, the NIESR said.
“The UK economy will continue to suffer what we’re calling a ‘slow puncture,’” NIESR director Jagjit Chadha told Bloomberg. “No pop, no bang, but a slow puncture, as investment is deferred and delayed in the face of uncertainty.”
Unlike former British prime minister Theresa May’s deal, Johnson’s does not require England, Scotland and Wales to stay in a customs union with the EU in the future, making tariffs and other barriers likely after a transition period.
The NIESR estimated that in 10 years’ time, Britain’s economy would be 3.5 percent smaller under Johnson’s plan than if it stayed in the EU — roughly equivalent to losing the economic output of Wales.
In a scenario of ongoing uncertainty similar to now — where Britain keeps the economic benefit of unrestricted access to EU markets, but without any long-term guarantees — the economy would be 2 percent smaller, it forecast.
May’s deal would have limited the damage to 3 percent, while a “no deal” Brexit would make the economy 5.6 percent smaller than if it stayed, the NIESR said.
Earlier this month another think tank, UK in a Changing Europe, estimated Johnson’s deal would make Britain more than 6 percent poorer per head.
The NIESR forecast Britain’s economy would grow 1.4 percent this year and next, assuming no major short-term change to Britain’s relationship with the EU, down from 1.6 percent last year and well below its long-term average.
Additional reporting by Bloomberg
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