UK’s Brexit losses more than 178 times bigger than trade deal gains
All of Boris Johnson’s new post-Brexit trade deals put together will have an economic benefit of just £3 to £7 per person over the next 15 years, according to the government’s own figures.
The tiny economic boost – amounting to just 0.01 to 0.02 per cent of GDP, and less than 50p per person a year – is dwarfed by the economic hit from leaving the EU, which the government estimates at 4 per cent of GDP over the same period.
According to analysis commissioned by The Independent from top academics at the University of Sussex UK Trade Policy Observatory, the much-trumpeted FTAs “barely scratch the surface of the UK’s challenge to make up the GDP lost by leaving the EU”.
Boris Johnson has boasted of the deals creating a “new dawn” and representing “global Britain at its best” – but just two of the dozens announced since the UK left the EU are expected to have any measurable economic impact at all.
Official estimates from the Office for Budget Responsibility point to a Brexit loss of over £1,250 per person over the coming years – over 178 times the most optimistic prediction for the benefits from the trade deals.
The analysis notes that the vast majority of FTAs announced by the government – such as those with South Korea, Singapore, or Vietnam – are simply attempts to replace treaties that those countries have with the EU, which Britain previously enjoyed as a member.
“They add nothing to UK trade, and, because they are not perfect replicas, actually harm it very slightly,“ wrote top trade economist Professor L. Alan Winters, who conducted the analysis with Guillermo Larbalestier, the centre’s research officer.
Labour seized on the findings and said the government had “gambled” on Britain’s prosperity and lost. The opposition called for Boris Johnson’s barebones Brexit trade deal with the EU to be improved so that the UK would “stop the haemorrhaging of our trade with Europe”.
A source at the Department for International Trade claimed the analysis was based on “old, static” figures – though most of the data was released just last summer as part of the government’s strategic case for the agreements.
“Our Global Trade Outlook – published in September – shows the centre of gravity on global trade is moving away from Europe and towards fast-growing markets in Asia-Pacific,” a spokesperson for the Department for International Trade said of the findings.
“Our strategy is latching the UK economy to these markets of tomorrow, and seizing the huge economic opportunities as an agile, independent trading nation.”
But according the analysis prepared for The Independent, even a new agreement with Japan, which the UK government has presented as a significant win that goes beyond what was agreed with the EU, is “modelled extremely closely on the EU-Japan agreement, with a few small differences”.
In that case, the benefits of a minor extension on digital trade are expected to be overshadowed by a technical change to customs rules, which will put some UK exporters at a disadvantage compared to their EU counterparts.
Taking the EU’s own deal with Japan into account, the academics wrote: “Relative to having no agreement, the government estimated that [the Japan agreement] would raise UK GDP by £1.5bn (0.07 per cent, or £22 per head), but relative to what the UK would have had without Brexit the gains will be negligible or negative”.
Only in the case of the deals in principle with Australia and New Zealand is there expected to be any new economic benefit – but these countries represent such a small part of UK trade that they have little effect. The analysis also notes that the agreements have not yet been signed or ratified and are so far just “agreements in principle”.
The DIT source added that the government wanted another “wave of ambitious trade deals with major economies like India, Canada, Mexico and the Gulf” – though these are yet to materialise. The government has in recent months stopped claiming it is close to a trade deal with the US – previously the biggest prize – after Donald Trump’s election loss dashed any hope of it happening soon.
But the UK Trade Policy Observatory academics dismissed the idea that trade agreements could ever conceivably counteract the economic damage of Brexit.
“Non-EU partners account for about half of UK total trade and so, to counteract the OBR’s 4 per cent loss from Brexit, would require agreements with each and every one of them to induce trade changes that create a 4 per cent increment to UK GDP. That is nowhere in sight in the numbers in the table,” they wrote.