08 March 2018

Financial Times: EU divergence to cost UK economy most, Brexit assessment shows

The Brexit impact assessments published by the Exiting the EU Committee show that the government’s policy of allowing regulatory divergence with the EU is estimated to cost the economy the most.

The document gives a detailed account of the cross government new economic model, which shows that in a classic Free Trade agreement with the EU27, the total hit to the economy would be 5 per cent less growth than otherwise after 15 years.

The largest component of that, some 2.5 percentage points, comes from “gradual regulatory divergence”, which is estimated to be worse for the economy, jobs and the public finances than new customs procedures, loss of access in some areas and lower migration.

The document states: “Given that the highest effects stem from these non-tariff barriers, a key objective from any future partnership is therefore to minimise these, although some will be very difficult to eliminate entirely”. This priority explains the government’s ambition for mutual recognition of regulations in goods and in financial services, which would lower the costs significantly if the EU27 agreed. The Council has, so far, refused to countenance such an approach.

The other main conclusion, not already in the public domain is that the public finance costs of Brexit are now thought to be more onerous than previous Treasury modelling suggested, with a net cost of 3 per cent of national income from an FTA agreement. 

Full article on Financial Times (subscription required)

EU Exit analysis

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