by Jason Gorringe, Tax-News.com, London
<h3>15 February 2021</h3> The European Union has released its Winter 2021 Economic Forecast, which says that Brexit will dent UK economic growth considerably, and more than for the European Union, despite the new free trade deal between the two parties.
The free trade deal between the UK and the EU provides for zero tariffs and zero quotas on all goods trade that complies with the appropriate rules of origin. However, the report highlights that non-tariff barriers have increased substantially for both imports and exports from and to the UK.
“In sum, while the FTA improves the situation as
compared to an outcome with no trade agreement
between the EU and the UK, it cannot come close
to matching the benefits of the trading relations
provided by EU membership,” the report says.
The report estimates that, for the EU, on average, the exit of the UK from the European Union under the FTA will generate a loss of GDP of 0.5 percent by 2022. The UK, meanwhile, will see a 2.25 percent drop in GDP over the same period.
Compared to a scenario where the EU and the UK failed to agree an FTA, the FTA has cut the negative economic impact on the EU by about a third and for the UK by about a quarter. The report says those member states with a larger share of goods trade with the UK benefit
relatively more from the FTA than those
with a higher share of trade in services.
While the UK and the EU have agreed to impose no tariffs on goods trade, new non-tariff barriers are considerable, equal to a tax of 10.9 percent for EU imports and 8.5 percent for UK imports, the report says.