Boris Johnson’s Brexit deal will leave the UK £70 billion worse off a year than if it remained in the EU, a leading economic think tank has warned in a damning report.
The National Institute of Economic and Social Research (NIESR) said the Prime Minister’s plan would shave nearly 4 per cent off of the economy by the end of the 2020s.
That is the equivalent of about £1,100 per person a year.
The independent forecaster’s outlook comes in the build up to a snap general election on December 12.
It is one of the first assessments of how the economy will fare under Mr Johnson’s new blueprint, which has been agreed to by EU leaders.
“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.”
Unlike his predecessor Theresa May’s deal, Mr 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.
NIESR estimated that in 10 years’ time, Britain’s economy would be 3.5 per cent 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 per cent smaller, it forecast.
Mrs May’s deal would have limited the damage to 3.0 per cent, while a no-deal Brexit would make the economy 5.6 per cent smaller than if it stayed in the bloc, NIESR said.
Earlier this month another academic think tank, UK in a Changing Europe, estimated Mr Johnson’s deal would make Britain more than 6 per cent poorer per head.
In the nearer term, NIESR said the Bank of England (BoE) should cut interest rates to 0.5 per cent from 0.75 per cent at a meeting next week, but said it did not expect the BoE to act until March, when Governor Mark Carney’s successor is due to be in place.
The Treasury said it is planning to achieve a “more ambitious” agreement with the EU than the free trade deal that NIESR has based its findings on. A spokesman said: “We are aiming to negotiate a comprehensive free trade agreement with the European Union, which is more ambitious than the standard free trade deal that NIESR has based its findings on.”