Frontier Economics was commissioned by Best for Britain to model the economic impact of strengthening the UK/EU relationship through greater cooperation on regulation.

For this report, such cooperation would reflect substantial improvements relative to the current Trade Cooperation Agreement (TCA) baseline, but would also not involve the reintegration of the UK into the Single Market and its disciplines.

Frontier modelled the effects of:

• Closer alignment in the area of regulation in goods and services between the UK and the EU;
• The effects of the United States (US) levying tariffs on the UK, the EU, and other trade partners.

The modelling uses a gravity model for trade, embedded in a broader economic model, belonging to a class of models sometimes described as New Quantitative Trade Models (NQTM).

The results suggest that both the UK and the EU stand to gain from deeper integration via regulatory alignment. The gains arise because of the reduction in trade costs generated by greater regulatory alignment. These gains also help to mitigate some of the effects of US tariffs. Our analysis also suggests that the benefits of deeper integration flow to all regions of the UK.  

The results also highlight the role played by particular features of the UK’s trade structure, notably its comparative advantage in services sectors and the dominance of these in UK exports. These features mean that the UK would benefit from a broad approach to regulatory alignment that includes both goods and services.

The modelling also shows that the UK as a whole is less exposed to tariffs levied by the US compared to its partners in the EU (and indeed the rest of the world). This is partly because of the role that services play in the UK’s trade structure: they help to shield the UK from some of the impacts of US tariffs.

Read the full report here: Modelling the effects of closer UK-EU cooperation and of US tariffs

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