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If we're moving towards a fudged NI backstop Brexit deal with a standard UK free trade agreement, thread on the economic effects

tl:dr Johnson's is a much HARDER Brexit than May's

- UK government thinks this will end up making us ALL £2,250 A YEAR POORER

Read on for why

1/
All the analysis comes courtesy of the UK govt's long term analysis from last November - you know, the one that Brexiter's approved of (sort of)

assets.publishing.service.gov.uk/government/upl…

It also shows real wages likely to take a long term hit of 6.4 per cent
And it imposes a nasty 2% of national income hit on the public finances - that means borrowing the amounts written on two well-known buses for no benefit (even after saving the EU membership costs)

3/
So why is the estimated GDP hit on a FTA Brexit estimated at 6.7% while Theresa May's Brexit predicated on a customs union 3.9%?

One thing is customs costs -

4/
This relates to filling in customs declarations which are needed in any free trade agreement (but not in the EU or under May's suggestions), alongside rules of origins red tape etc

5/
HMRC this week estimated some of these costs (not ROO) at £15bn a year
On non tariff barriers, an FTA throws up additional barriers compared with May's Brexit. Her deal tied UK regulations on goods to the EU's - preventing onerous checks on goods, especially agri-food
The more bare-boned a UK-EU FTA, the more of these costs the UK will have to bear in goods. There will in any case be big barriers put up in services (under both potential deals)
What about the benefits - well clearly there is scope for UK - ROW trade agreements and regulatory flexibility and more so under Johnson's harder Brexit.

But government has looked and looked and it can't make the numbers for the benefits look big
As a former special adviser in both the Coalition and May govt has written, the additional customs red tape dwarfs the usual benefits officials hope to find in regulatory improvements (a good year was £500m improvements)

Some of the costs in the government report depends on the migration assumption. If there is no drop in EU migration, the costs to the UK come down
We don't know exactly what the government's new migration policies will be. But it is worth noting that cities such as Bristol are fearful they will be restrictive, so at the upper end of the range

ft.com/content/9ce780…
And with bigger customs checks and non-tariff barriers on goods from no regulatory alignment - the government thinks the big losers will be in manufacturing - especially automotive and chemicals

(look at the white circle compared with the blue diamond)
And don't live in the North East or Northern Ireland....
These are all from the government's own cross-government analysis.

It's clear this might be a deal that can be struck with the EU. It's also clear that it adds to the negatives for the economy under Theresa May's Brexit deal

ENDS/
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