Why is the UK so expensive

Brexit: This is how expensive Johnson's deal will be for the British

Boris Johnson's Brexit deal will cost the British economy more dearly than the ongoing uncertainty about future relations with the EU. The first impact assessment of the present exit agreement, drawn up by the independent National Institute of Economic and Social Research (NIESR), comes to the conclusion that in the long term, gross domestic product will lag an average of 3.5 percent per year below the growth rate that would be achieved if it continued EU membership would have been possible. If, on the other hand, the situation remains the same as before, a scenario of chronic uncertainty, the loss would be two percent per year.

The deal would reduce the uncertainty, explained Arno Hantzsche, senior economist at the institute. “In return, it also excludes the possibility of a closer trade relationship with the EU.” In the current situation, however, there is still a chance that Great Britain could also belong to the customs union and the internal market in the future. Hantzsche and his colleagues put the cost of the exit at around 70 billion pounds a year. That's £ 1,100 per capita, and the total is equivalent to the economic output of the Wales region.

For comparison: The deal that Theresa May negotiated last year and which included the unpopular backstop, membership of the customs union to avoid border controls on the Irish island, would have been a little better with a three percent reduction in GDP per year. According to the forecast, a chaotic Brexit would cost 5.6 percent economic growth.

The NIESR analysis is the first estimate that Johnson's specific agreement has undertaken. British MPs asked the Treasury Department for an analysis after the deal, but Treasury Secretary Sajid Javid declined. The deal was "of course in our economic interest," he let the finance committee know.

"Significantly higher hurdles for exchanging goods"

The Parliament approved Johnson's deal in principle, but not the ambitious schedule. The EU has agreed to postpone the Brexit deadline from the end of October to the end of January. Johnson's government has now pushed through new elections at the beginning of December, in the hope of getting its program through easier with a majority in the lower house.

Analysts have already indicated adverse effects. Johnson is striving for a looser connection with the EU than his predecessor. This means that UK regulations and certifications may differ from those in the EU. This gives the country the opportunity to lean closer to other markets. Johnson has repeatedly expressed particular interest in a free trade agreement with the USA.

"This means significantly higher hurdles for the exchange of goods and services with the EU," explained Hantzsche. Ultimately, this will be reflected in higher costs in foreign trade with the EU, and exports are likely to decline. The ongoing uncertainty is limiting the propensity to invest, but nothing will change for exporters for the time being.

Regardless of the threatening negative effects of the EU exit treaty, the UK budget situation has recently deteriorated considerably, warned Hantzsche. He characterized it as “in disorder” and referred, among other things, to the orgy of spending since the beginning of the Johnson administration in late July.