UK - EU trading relations post Brexit less favourable to UK than staying in EU: Rand Corp

Nearly all the possible trading relationships between UK and the EU following Brexit would be less favourable to UK than staying in the EU, an influential US think tank said.

According to The Rand Corporation study, the worst option would be a "no deal", which would leave the UK economy 4.9 per cent poorer by 2029.

The absence of a deal would also negatively impact the EU economy, but it would be "relatively minor".

According to the report, even a "soft Brexit" involving staying in the free market would not be as positive economically as staying in the EU.

Rand, which plays a significant role in US, receives half of its funding from the US government.

It has advised the UK government on policy issues such as mental health, as also the European Parliament and the European Commission.

It says in the report that Brexit would likely have a "mostly negative effect" on US interests in Europe, given the UK is a firm ally of the US in security matters and a supporter of free markets.

"An EU without the UK may be more willing to create barriers for non-EU companies, to the detriment of US companies and the American economy," the report says.

"In the development of EU defence policy, for example, the UK aim was often to ensure that EU measures did not undermine NATO and the strong transatlantic partnership."

Meanwhile, UK prime minister Theresa May hailed an interim Brexit deal as proof that UK could leave the EU in a "smooth and orderly way". She added however, that the payment of the divorce bill was dependent on a final trade agreement.

The government entered into an agreement with Brussels last week on three priority separation issues, which paved the way for EU leaders meeting on Thursday and Friday to approve the start of trade talks.

Apprising parliament on the terms of the financial settlement, rights of European citizens and the Irish border after Brexit, May received support from all sides of her Conservative party.