Boost to UK economy from US trade deal could be 450 times smaller than loss from no-deal Brexit, government analysis finds

An official government analysis of a potential trade deal with the US has found that the boost to the British economy may be as little as 0.02 per cent of GDP – around 450 times smaller than the potential loss from a no-deal Brexit.

Liberal Democrats said the figures showed that the gains from any deal with Donald Trump’s US administration “will not come close to outweighing what we expect to lose from leaving the EU” and accused Boris Johnson of being “seemingly hellbent on risking UK prosperity” .

Figures released by the government as part of the negotiating mandate for the US trade talks put the expected increase in UK GDP from a successful deal at between 0.02 per cent and 0.36 per cent.

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By comparison, the government’s most recent estimate of the cost of Brexit to the UK economy, published in 2018, suggested that a Canada-style free trade agreement could hit GDP by between 3.4 and 6.4 per cent, while a no-deal Brexit – referred to by Boris Johnson as an “Australian-style agreement” – would cost the economy between 6.3 and 9 per cent of GDP.

Despite casting doubt on the 2018 estimates, Mr Johnson’s government has so far not produced its own assessment of the economic impact of Brexit.

Unlike the  for the proposed UK/US deal published by the Department for International Trade today, last week’s mandate for talks with the EU made no estimate of the likely impact of a deal in cash or percentage terms.

Today’s figures are likely to increase pressure on Mr Johnson to spell out his estimates of the likely economic outcome of the negotiations with the EU which kicked off in Brussels today.

The DIT document sets out two “plausible” outcomes from the planned US talks – a more limited deal delivering “substantial” tariff liberalisation and a 25 per cent reduction in non-tariff barriers, and a deeper arrangement with “full” tariff liberalisation and 50 per cent reduction in non-tariff barriers.

Under the first scenario, DIT puts the likely benefit to UK GDP at between £0.5 billion and £3.1 billion (0.02-0.15 per cent), with a central estimate of £1.6 billion (0.07 per cent).

Under the second, UK GDP could increase by £1 billion – £7.7 billion (0.05-0.36 per cent), with a central estimate of £3.4 billion (0.16 per cent of GDP).

Liberal Democrat international trade spokeswoman Sarah Olney said: “Boris Johnson has repeatedly claimed that negative impacts of Brexit will pale in comparison to the benefits. 

“But today’s analysis is clear – the gains from the best-case trade deal with Donald Trump will not come close to outweighing what we expect to lose from leaving the EU.

 “The situation will be even more catastrophic if Boris Johnson sends the UK careering off a no-deal cliff edge, thanks to his self-imposed June deadline for talks. It is astounding that the prime minister is seemingly hellbent on risking UK prosperity.

 “Liberal Democrats will continue to fight against the PM’s damaging hard Brexit plans. We will continue to push for what is in the national interest – the closest possible relationship with the EU.”

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