The damage would be so great that the UK would be better off continuing with the huge economic uncertainty from the ongoing Brexit crisis, the National Institute of Economic and Social Research said.
The respected think-tank also said its conclusions hinted at the reasons behind the refusal by Sajid Javid, the chancellor, to publish the Treasury’s economic forecasts for the agreement.
“I would ask you to draw your own conclusions from that,” Jagjit Chadha, its director, told The Independent.
In a now-notorious comment two weeks ago, Mr Javid dismissed fears over the deal agreed with the EU, saying “It’s self-evident what we have achieved with this deal is the right thing for the economy.”
But the NIESR has concluded lost trade and lower migration will hit productivity, delivering the 3.5 per cent annual GDP loss within 10-15 years of Brexit going ahead.
That will be piled on top of a £50bn loss since the Brexit referendum nearly three-and-a-half years ago, which has cut 2.5 per cent from national output.
“It means future trade will face significant higher barriers, both to goods and services,” said Arno Hantzsche, the organisation’s principal economist, of the agreement on the table.
“That means we would not expect there to be a boost to the economy. In fact, our estimate is that, in the long run, the economy will be some 3.5 per cent smaller every year.
“This corresponds, in today’s money, to roughly the size of Wales’s economic output – or £70bn a year, or more than £1,000 per person per year.”
The NIESR said the current economic loss from the Brexit uncertainty – cited by ministers as the reason for the sluggish economy – was lower at 1-2 per cent per year.
“The estimated loss of GDP so far is because businesses generally have not been investing, whereas the loss in the future will be cause certain types of economic activity in the UK will be no longer profitable,” its report added.
Business groups have strongly criticised the new agreement, because – unlike Theresa May’s ‘blind’ Brexit – it paves the way for a hard exit, outside the customs union and without economic alignment.
The NIESR also warned economic policy was “in disarray”, after next week’s Budget was cancelled, saying: “We have no budget, spending review and published forecasts.”