New research has revealed the true cost of the current Brexit deal as negotiated by the UK Prime Minister.
The report, The Economic Consequences of the Brexit Deal, was published by academic think tank The UK in a Changing Europe; it examined the impact of the withdrawal agreement between the UK and EU.
The report estimated that the current deal would reduce the UK GDP per capita in a decade by between 1.9 per cent and 5.5 per cent.
The cost to the public finances is better off under the deal scenario than a no-deal one, with the deal costing between 0.4 of a percentage point and 1.8 per cent of GDP and a no-deal costing between 1 and 3.1 per cent.
The report considered three scenarios: remain, deal and no-deal, with the no-deal being worse case in all scenarios.
The UK in a Changing Europe’s director Professor Anand Menon said that the economic impact of Brexit had been lost in the politics, but it needed to be considered.
“Obviously, this kind of economic modelling needs to be treated with appropriate caution. However, our estimates provide a clear indication of the broad scale of the impact of the deal negotiated by the Prime Minister.”
The report found that the two biggest impactors on the UK economy would be trade and immigration.
Under the deal, it has been assumed the UK will remain in a customs union with the EU but will leave the single market, which would increase the regulatory barriers to both goods and services.
The reduced immigration would impact both skills and unskilled labor, with a reduction to UK GDP per capita of between 1.9 per cent and 5.5 per cent.
A no-deal would see the UK substantially worse off with a reduction of between 3.5 and 8.7 per cent.
Senior fellow at the think tank Professor Jonathan Portes said the deal would be a long way from frictionless trade.
“The additional trade barriers, combined with reductions in both skilled and unskilled migration from the ending of free movement, would leave the UK economy significantly smaller than it would otherwise have been over the medium to long term. That, in turn, would mean higher taxes or public spending.”
The deal has been signed off by the EU but it has yet to pass the UK parliament – where it is not expected to – which could mean a no-deal is in the future for the UK.
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