(Bloomberg) -- Prime Minister Boris Johnson's newly agreed deal to leave the European Union will be better for economic growth than no deal at all, but worse than the agreement reached by his predecessor Theresa May.
That's the analysis of Bloomberg Economics's Dan Hanson and Jamie Rush. Over time, Johnson's deal is consistent with annual growth of just under 1.5%. The trend would be 1.6% if the U.K. stayed in the EU's customs union, or 1.7% under May's deal. Remaining in the bloc would boost average growth rates to 1.9%, they said in a report on Thursday.
“In the long run, growth will be much slower compared with remaining in the EU and materially weaker than the arrangements negotiated by May,” they said. “A free-trade arrangement is no substitute for the single market.”
Johnson's unexpected clinch of an agreement with the EU lowers the chances of no deal, as reflected in the pound's gains. While it probably won't pass Parliament this week, the premier can rally around his arrangements in an upcoming election and push it through early next year, Bloomberg Economics said.
The stronger pound will keep a lid on inflation and support household incomes, but uncertainty will continue to hang over companies, according to the report. The Bank of England will probably keep policy unchanged while it assesses how much the economy has weakened this year.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Andrew Atkinson
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