LONDON • Britain will be on course for more distant economic ties with the European Union, making the country poorer, if British Prime Minister Boris Johnson wins parliamentary backing for the Brexit deal he clinched with Brussels on Thursday.
Compared with the deal his predecessor Theresa May reached last year, which Parliament rejected three times, Mr Johnson's deal aims for less regulatory alignment with the EU and greater trade barriers between Britain and its largest trading partner. Mr Johnson now faces a fight to convince Parliament, where his Conservative Party lacks a majority, to approve the deal in a vote due to take place today.
"Even if Mr Johnson does manage to close the deal, investor celebration of this might soon be dampened by the recognition that this is a fairly hard Brexit," said Janus Henderson fund manager Paul O'Connor.
Britain's Finance Ministry and almost all external economists have forecast that increased trade barriers will cause the British economy to grow more slowly than if it were to stay in the EU, and the damage increases as trade barriers rise.
Based on what was known of Mr Johnson's plans last week, think-tank UK In A Changing Europe estimated that trade barriers would make Britons more than 6 per cent poorer on a per capita basis than staying in the EU - equivalent to £2,000 (S$3,500) per year in the medium term.
Mrs May's deal would have reduced income by just under 5 per cent per head, while a no-deal Brexit, which would leave Britain trading purely on World Trade Organisation terms, would lower incomes by just over 8 per cent.
British Finance Minister Sajid Javid rejected attempts to show Mr Johnson's deal would have a bigger hit on the economy than Mrs May's, saying it was "self-evident" that it would end the uncertainty that has held back company investment.