A US trade deal could boost the UK economy and increase wages but is unlikely to compensate for lost EU trade and risks job losses in certain sectors, according to the UK government.
Britain’s negotiating objectives for upcoming trade talks with the US were published in a government document on Monday. Prime minister Boris Johnson has vowed to drive a “hard bargain,” with negotiations expected to begin later this month.
The paper includes official forecasts of what lower barriers to US-UK trade could mean for Britain’s economy over a 15-year period following a new agreement.
What a US trade deal would mean for the economy
Officials say a trade deal would make it easier for UK businesses to trade in the US, while more US imports could boost choice and cut prices for UK consumers.
Government estimates suggest the UK economy could be up to 0.36% larger, if the two sides agree to bring down all current tariff barriers to each other’s goods and services. But a less wide-ranging agreement may only provide a boost of as little as 0.02% to the total value of UK goods and services in the long run, according to the analysis.
The figures point to a £3.4bn boost to the economy in a best-case scenario, and a £1.6bn boost if the two sides agree to “substantial” but not complete reductions in tariffs.
Ian Tandy, head of trade at HSBC UK, said the US was already the most valuable individual country for UK exports, but many UK firms were keen for new opportunities in the US market.
But he noted trade negotiations are complex, and finding common ground takes time. The government’s figures also suggest a US trade deal would not come close to compensating for lost trade with the EU.
Official figures released in 2018 suggest the government’s planned EU deal could leave UK growth at least 4.9% lower than if Britain remained much closer economically to the bloc.
How a deal could affect workers’ pay
The government also predicts a trade deal would hand workers a real pay boost of between £1bn and £1.8bn over the course of 15 years. But it would only mark an increase of between 0.1% and 0.2% on the average UK worker’s real pay packet.
It says studies show greater international trade tends to make firms more specialised and productive. This can free up cash for higher pay, dividends, investment or other purposes.
Lower prices could also boost real incomes, as US firms would be more able to compete with British firms to win over UK consumers.
But some critics fear a trade deal could also see the US push for the UK to de-regulate some of its standards on employment rights or food safety and animal welfare.
What a deal could mean for UK jobs
The paper admits there will be winners and losers as UK firms face increased competition from US rivals.
The government decided not to predict the overall impact on employment numbers, or look at the chances of job losses or job creation in the short term. But it estimated which sectors would be bigger or smaller as a proportion of the workforce in 15 years’ time.
Employment levels could fall as a share of the UK workforce in business and financial services, insurance, agriculture, paper manufacturing, personal services and the wholesale and retail trade, according to the analysis.
The energy sector is expected to see the greatest increase in employment, followed by the car manufacturing, chemicals, rubber and plastics industries.