Brexit impact analysis wildly optimistic on non-EU trade

by Hugo Dixon | 08.03.2018

The government’s analysis argues trade with the rest of the world will partly mitigate the damage from quitting the EU. This conclusion is based on unrealistic assumptions. Brexit will harm non-EU trade as well as trade with Europe.

The report, which the government initially tried to hide, predicts that quitting the EU will knock growth by 2-8% over 15 years depending on the type of trade arrangement we end up with. But it says deals with rest of world could add 0.2-0.7% to growth. There are three problems with this conclusion about non-EU trade.

First, the research “assumes transitional adoption of all existing EU FTAs”. About one eighth of our trade is with the 66 countries with which the EU has deals. These include important markets such as Canada, Switzerland, South Korea and Mexico. The assumption that we will just roll all these deals over seamlessly is optimistic.

Second, the model assumes that the EU won’t do any more trade deals of its own. That’s why any agreements we reach on our own add to our growth. This assumption is astonishingly unrealistic. After all, the EU has already virtually finalised a trade pact with Japan and is in negotiations with other countries such as Australia and New Zealand.

We’re not going to get ahead of the queue with these countries. We probably won’t even be first in line for a deal with America, which the government’s analysis naively assumes is in the bag. The US is more likely to prioritise the EU for a trade pact. In other words, if we stayed in the EU, we would benefit from new deals it will cut with the rest of the world that the government model takes no account of. It’s not a fair or sensible comparison.


Chart showing UK trade destinations


Third, the model assumes we can secure “greater depth and breadth in agreements we reach with other countries” post Brexit. It doesn’t even consider the possibility that Trump’s America or Xi’s China might use their greater clout to bully us into accepting deals that suit them rather than us. If we stayed in the EU, we would have equal or greater heft and so couldn’t be bullied.

When they did their analysis, the government’s economists didn’t know Trump would slap tariffs on our steel exports. But they should have known about his desire to force chlorine-washed chicken down our throats and Beijing’s habit of dumping steel on our markets.

The section of the impact analysis devoted to trade with the rest of the world is flawed.  

Is it possible civil servants went out of their way to make Brexit look better than it really is in order to pander to their political masters’ guff about global Britain? Perish the thought.

Want more InFacts?

Click here to get the newsletter

    Your first name (required)

    Your last name (required)

    Your email (required)

    Choose which newsletters you want to subscribe to (required)
    Daily InFacts NewsletterWeekly InFacts NewsletterBoth the daily and the weekly Newsletter

    By clicking 'Sign up to InFacts' I consent to InFacts's privacy policy and being contacted by InFacts. You can unsubscribe at any time by emailing [email protected]

    3 Responses to “Brexit impact analysis wildly optimistic on non-EU trade”

    • Not so much that civil servants want to pander, but they fear getting slammed like they did last time. OK, probably they are pandering as well, like so many others

    • Now that Trump is intent on a trade war, how is that FTA with the US going to work exactly, disgraced former defence minister Fox?

    • The UK is asking for an exemption to Trump’s trade war while, as members (at the moment) of the EU, we will presumably have to take part in retaliatory tariffs. That’ll go down with the orange buffoon.

      Can’t see the UK getting much of a FTA after that.