A leading international economic watchdog urged the British government to conclude a free trade agreement with the European Union in the coming days and weeks to support the recovery from the coronavirus pandemic.
In its latest survey of the the British economy, the Paris-based Organization for Economic Cooperation and Development said Wednesday that a trade deal that ensures a close relationship will minimize the costs of Brexit.
The OECD, which monitors and advises its 37 member countries, said the British economy will likely end this year 10.1% smaller than the start of the year after the impact of the pandemic, which led to a wide-ranging lockdown in the spring. After a summer lull, the resurgence of the virus has led to further restrictions on businesses by the government, both nationally and locally.
It warned that the economy won't have recovered all the ground lost in the spring by the end of 2021 as it is factoring growth of 7.6% for that year. That forecast is based on the assumption that the U.K. and the EU will have reached a free trade arrangement.
Alvaro Pereira, on OECD director, said in a news conference that any form of Brexit “obviously compounds” the economic effects of the pandemic but that a trade deal would “help minimize the impact.”
Though a trade deal would ensure there are no tariffs and quotas on trade in goods between the two sides, there would be technical costs, partly associated with customs checks as well as non-tariff barriers on trade in services.
A summit of EU leaders on Thursday had been set as a deadline for the trade by British Prime Minister Boris Johnson. But the talks are now widely expected to continue for a few more weeks.
Though the U.K. left the bloc on Jan. 31, it is in a transition period that effectively sees it abide by EU rules until the end of this year.
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