If a Boris Johnson government does agree a trade with the EU by the deadline of the end of 2020, which is what the Tories say they want, it’s likely to be a basic deal. That will not be best for the UK economy.
Sajid Javid, the Tory chancellor, said (at 2:12:05) on the BBC’s Today programme this morning that a Johnson government will have agreed “a very ambitious, deep comprehensive free trade agreement” by the end of 2020. In practice, a deal has to be wrapped up by June next year to allow for ratification. The time pressure alone makes a full deal covering goods and services hard to reach.
That means the likely outcome will be a minimal deal securing tariff free trade for most goods but with question marks over agriculture and fisheries, including access to fishing waters. Services would not be covered and the UK’s large and competitive financial services sector would come under a precarious equivalence regime. There would still be issues about regulatory convergence and freedom of movement will probably be restricted.
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This will all limit growth and discourage inward investment. It may allow for trade deals with other countries. But these take time, are unlikely to cover services much and could prove controversial – for example in the case of the US. They are unlikely to be a substitute for the loss of free access to the EU. Government analysis suggests that new deals may not add more than 0.1-0.2% to UK GDP after 15 years.
Most forecasters remain downbeat on the economy. The November OECD economic outlook forecast UK growth of only 1% next year after just 1.2% in 2019, with only a modest improvement thereafter. And the UK in a Changing Europe think tank at King’s College, London, concluded that Johnson’s deal will suffer increasingly from rising non-tariff barriers with the EU. This will leave us considerably poorer than staying in the EU and worse off per capita than Theresa May’s deal.
