By Brexit Carnage editorial staff
This week’s UK-EU trade deal represents a “marginal gain” that won’t significantly boost the Brexit-hit economy, a major European investment bank says.
The deal would add nearly £9bn to the economy by 2040 and would boost trade with the EU as Britain’s single biggest trading partner, Chancellor Rachel Reeves claimed at a meeting of G7 finance ministers in Canada on Friday.
However, while the deal was hailed as the biggest reset of trade ties since Brexit, the UK government estimates that material changes in areas covered such as fisheries, food and energy would increase GDP by 0.2% by 2040, Dutch investment bank Rabobank said.
“That is another marginal gain, after the India free-trade agreement,” Rabobank senior macro-economic strategist Bas van Geffen said in a research report.
“As such, it can only be seen as limiting the damage of Brexit rather than a macro-economic game changer.”
Swiss-style relationship
The deal shows the UK clearly moving towards a relationship with the EU resembling Switzerland’s, Rabobank says.
“It’s formally sovereign, yet locked in ongoing negotiations and deeply enmeshed in EU frameworks across the entire economy,” van Geffen said.
“For one, the existing fisheries agreement between the UK and the EU has been extended from mid-2026 to 2038. In exchange, the UK will gain improved and simplified access to the EU market for agricultural and food products with no time limits.
“However, this comes with the condition that the UK must ‘dynamically align’ with EU rules on sanitary and phytosanitary standards, food safety and general consumer protection. That’s similar to the arrangement Switzerland has.”
The alignment will also involve “politically sensitive” oversight by the European Court of Justice in specific areas, Rabobank said.
Conflicting trade deals
“Moreover, these conditions also mean the UK can’t strike a trade deal with the US involving food and agriculture unless there is no trans-shipment of goods, or unless the EU signs a trade deal with the US that solves this issue. Is the UK about to sign a series of conflicting bilateral trade deals?” van Geffen said.
“Of course, the British trade deal with the US included very limited agreements on agriculture, which perhaps already accounted for the fact that the UK-EU trade agreement would be very food-centred.
“That said, Trump has hailed his trade deal with the UK as ‘dramatically increasing access for […] virtually all the products produced by our great farmers,’ and so he could certainly try to push a bit harder – which may still put the UK in a bind.”