Boris Johnson's Brexit plans will cost UK economy up to £20bn a year, report warns

“Getting Brexit done” on the terms of Boris Johnson’s general election manifesto will inflict a hit of up to £20 billion a year on government finances, rising as high as £28 billion if the UK crashes out of the EU without a trade deal agreement at the end of 2020, a new report has warned.

Far from bringing the Brexit process to a conclusion, the prime minister’s plan to leave the legal structures of the EU on 31 January will ensure that “Brexit uncertainty will continue”, with no-deal the default scenario unless Mr Johnson can meet his own “hugely demanding” timetable to conclude a future relationship agreement within 11 months, the report found.

By contrast, analysis by the UK in a Changing Europe (UKCE) thinktank estimated that Labour’s softer proposed withdrawal deal would deliver a positive fiscal impact of £2-£12 billion, while the Liberal Democrat plan to halt Brexit altogether would provide a “Remain bonus” worth £12 billion a year to government coffers.

Despite Mr Johnson’s often-repeated assurances that “getting Brexit done” will bring an end to the three-year period of business uncertainty following the 2016 referendum, the think tank found that it was “easy to imagine” outcomes that will “lead to an increase not a reduction in economic uncertainty”.

In its analysis of the main parties’ manifestos for the 12 December election, UKCE found Brexit policies to be “vague and potentially unrealistic”, with a “glaring” failure by both Tories and Labour to set out how they intend to deal with the “significant” impact which EU withdrawal will have on the UK economy over the years to come.

“As in 2017, the Conservatives and Labour seem determined to ignore the economic significance of Brexit,” found the report.

“This is despite the obvious fact that it is likely to be the most important factor determining the path of the British economy in the next five years.

“Over the next year, the new government will have to take decisions that shape the UK’s economic, regulatory and trading relationship with our largest trading partner for the foreseeable future. None of the manifestos – especially that of the party most committed to Brexit, the Conservatives – even pretends to address how this would affect their wider economic strategies and ambitions. The Liberal Democrats are the exception: they trumpet a Brexit dividend owing from their commitment to stop Brexit.”

The report found that Mr Johnson’s plan for EU withdrawal soon 31 January, followed by the successful negotiation of a free trade agreement with Brussel by the end of 2020, would lead to a reduction in GDP of 1.1-2.6 per cent, translating to a cut in government revenues of between £6bn to £20bn a year.

But it warned that meeting the 31 December deadline for an FTA will require “difficult and painful concessions on both sides on politically sensitive issues, such as fisheries, agriculture and manufacturing”.

Failure to secure an FTA – or to request an extension to talks, which the Tory manifesto rules out – would mean a cliff-edge departure on unfavourable World Trade Organisation rules at the start of 2021, pushing the hit to GDP up to 3.2-4.5 per cent at a cost of up to £28bn a year to government finances.

Rather than run this risk, the report suggested Mr Johnson may well repeat his approach to the 31 October withdrawal deadline of loudly declaring his refusal to extend, only to accept an extension “wholly or largely on the EU’s terms” at the last minute.

“It is at least conceivable that the phrase ‘Get Brexit Done’ may ring more than a little hollow a year from now.,” the think tank warned.

The Conservative goal of having 80 per cent of UK trade covered by FTAs within the next three years – starting with the US, Australia, New Zealand and Japan – was found to be “extremely optimistic”, particularly as other countries will want to know the nature of the UK’s future relationship with the EU before making their own deals.

Labour’s timetable to negotiate a softer Brexit and put it to a referendum within six months was judged to be “exceedingly demanding”, as it could take as much as 22 weeks simply to complete the work of making a public vote possible.

The report found that Mr Johnson’s commitment to an Australian-style system for migration was “inaccurate”, as most of those allowed to come to the UK will be required to have a job offer.

And it said that the Johnson government appears to be heading for a “substantially more liberal” approach to immigration than his predecessor Theresa May.

UKCE director Professor Anand Menon of King’s College London, said: “The harder the Brexit, the more difficult the already problematic economic and fiscal arithmetic will become for any government.

“One way or another, this election may ‘Get Brexit Done’, but the economic impacts will be with us for the next Parliament and beyond.”

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