A new analysis of the UK’s Brexit deal has dubbed the agreement with the European Union “less patisserie department than thin gruel.”
A research note by analysts at JP Morgan (JPM) published on Monday read said that the “deal provides for zero-tariff, zero-quota trade in goods... but leaves significant regulatory and administrative impediments across both [the] goods and services trade.”
It notes that future autonomy from the EU in trade and regulation is still ill-defined and that the long-run negative impact on UK GDP could amount to a 5% to 10% knock in comparison to where the economy might be with EU membership.
This is a damning indictment of what the UK government has been celebrating as a diplomatic triumph. The note plays on the claim that the UK sought to “have its cake and eat it,” and had prepared a deal that was “from the patisserie department.”
The EU and UK struck an 11th-hour free trade agreement on Christmas Eve to avert a no deal Brexit when the transition period ended on 1 January. However, financial services were not covered by the agreement.
The EU has granted the UK temporary waivers in two areas — clearing and securities settlement. Both sides have agreed to try and reach a separate, fuller agreement covering financial services by March.
Warnings have come from all sides about the potential future relationship of the UK with the EU.
Last week, the governor of the Bank of England Andrew Bailey said the UK should avoid becoming a financial services “rule taker” from the EU at all costs, even if it means failing to strike a deal covering the sector.
The JP Morgan analysis also comes as a new survey by the manufacturers’ organisation Make UK, released on Monday morning, suggested almost half of its members are worried about customs delays, seeing them as their biggest risk.
Another 39% said the increased costs of complying with regulation are the biggest risk they face, and 14% are worried most about major customers relocating outside the UK.
Watch: 10 ways to Brexit-proof your finances