The Brexit trade deal will swipe around £45bn over two years from the UK economy, a Brussels analysis says – after Boris Johnson refused to carry out his own study.
The Christmas Eve agreement – hailed as “fantastic” by the prime minister – will cut UK output by about 2.25 per cent by the end of 2022 compared with EU membership, the analysis has found.
With annual gross domestic product (GDP) standing at around £2 trillion, such a loss would be equivalent to around £45bn over the next two years.
Although the hard exit terms will also hit the EU economy, that loss is estimated to be only about 0.5 per cent over the same period.
The European Commission said avoiding the threatened no-deal outcome before the New Year’s Day deadline “improves the situation”.
But, its winter economic forecast added: “It cannot come close to matching the benefits of the trading relations provided by EU membership.”
The figures are the first appearing to back up the overwhelming verdict of economists that the skeleton deal – leaving the single market and customs union – will hurt the UK economy.
The government has repeatedly refused to carry out its own analysis, trade secretary Liz Truss telling MPs last month that it was time to “move forward”.
However, assessments have been released for much less significant ‘rolled over’ deals with tiny economies such as Moldova and North Macedonia – and for trade targets including the US, Australia and New Zealand.
All analysis had showed that, whatever future deals are signed, they cannot come close to compensating for ending frictionless trade with the UK’s biggest market.
The Treasury has been asked to respond to the Brussels verdict, which comes amid mounting business fury over the blizzard of new red tape hitting trade.
The last-gasp agreement maintained zero-tariffs on the sale of goods crossing the Channel – but only if firms meet rules of origin on products.
And new paperwork, customs checks and confusion over the new system have slowed up deliveries, forcing some firms to give up on EU trade altogether.
The Commission said the “shock” from these so-called non-tariff barriers amounted to the equivalent of a tax on imports worth 10.9 per cent for the EU and 8.5 per cent for the UK.
And the absence of any specific agreement for services, which form 80 per cent of the British economy, would further hurt the UK and some EU nations.
However, avoiding a crash-out Brexit – and moving onto World Trade Organisation terms – had reduced the further damage for the UK by a quarter.
