NIESR: New Brexit deal to lower GDP by 3.5 per cent over ten years
The new Withdrawal Agreement will see the UK GDP decrease by 3.5 per cent in a decade, according to a study compiled by the National Institute of Economic and Social Research into how Brexit will impact the economy.
The study also estimated that the UK economy will lose out on £70 billion.
The view of the NIESR is that the new deal will “eliminate” the chances of a “closer trading relationship with the EU", despite the risk of a disorderly Brexit being removed.
The forecaster also feels that customs and regulatory barriers will act as a hindrance to the trade of goods and services with Europe and leave the UK “worse off” than it would be had it remained a member of the bloc.
The NIESR said: "We estimate that, in the long run, the economy would be 3.5 per cent smaller with the deal compared to continued EU membership."
The study, one of the first of its kind, compared different Brexit scenarios with staying in the bloc, concluding that under a no-deal Brexit, the economy would contract by 5.6 per cent.
In the scenario that uncertainty was able to persist but trade with the EU went uninterrupted, a two per cent fall in GDP was forecast.
The NIESR said: "The economic outlook is clouded by significant economic and political uncertainty and depends critically on the United Kingdom's trading relationships after Brexit.”
In the wake of the study, chancellor Sajid Javid has ruled out making fresh official assessments of the economic impact of the new deal, saying that it is "self-evidently" in the "economic interest" of the UK.
The Treasury has also moved to reassure the public by saying it is pursuing a “more ambitious" and "comprehensive free trade agreement" with the bloc than the "standard free trade deal that NIESR has based" the study on.
The NIESR’s analysis concludes that the new Withdrawal Agreement is inferior to that negotiated by former prime minister Theresa May, in that it will have a more adverse impact on the economy, adding that it is already "estimated to be 2.5 per cent smaller now than it would otherwise have been” had Remain won in the 2016 EU referendum.
Governor of the Bank of England Mark Carney was approving of the news of a Brexit deal earlier in October, calling it a “net economic positive” which banished fears of a disorderly Brexit.
Yet, Carney did concede that it “remains to be seen” if the UK’s new future relationship with the bloc would yield a positive outcome for the economy, adding that it was a very "different" arrangement than that which was originally put forward in the previous deal.