No, the Treasury doesn’t expect the economy to shrink if we sign a Canada-style deal with the EU

3rd Mar 2020

Claim

The Treasury expects the UK economy to shrink by 4.9% under a Canada-style deal with the EU.

Conclusion

The Treasury estimated that a free-trade agreement similar to Canada’s would mean the UK economy grows between 4.9% and 6.7% less over 15 years, than it would have if we had remained in the EU. But that doesn’t mean the economy will shrink.

“The UK is seeking a Canada-style deal with the EU, which Treasury analysis estimates will shrink the British economy by 4.9 per cent.”

The Telegraph, 2 March 2020

Last year we saw various Liberal Democrat politicians repeating the incorrect line that Brexit would shrink the economy, citing government analysis.

Now we’ve actually left the EU, it seems a similar claim is being repeated by the Daily Telegraph.

This seems to refer to government analysis which estimated that a hypothetical free-trade agreement (FTA) with the EU where we maintained tariff-free access but there were still non-tariff costs (such as regulatory barriers) would cost the UK between 4.9% and 6.7% of GDP growth after 15 years. 

We’ve written more about this projection, and others, here.

The Telegraph’s claim is incorrect because the government’s analysis said that “in all scenarios the economy would be expected to grow”, albeit slower than if we had not left the EU.

That’s very different to suggesting the UK economy will shrink.

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