Aligning for growth? The benefits of an EU-UK mutual recognition agreement

Since Britain left the EU, thousands of products that are made in the UK have to be tested and certified by EU bodies before they can be exported. This adds significant trade costs, dampening exports and hurting businesses. 

This paper examines a solution to this problem in the form of a mutual recognition agreement (MRA): an agreement that would allow Europe to recognise UK testing bodies as fit to certify products for the EU market. 

We find an MRA could boost UK exports by between £3.7 billion and £6.5 billion. This is equivalent to about 0.1 or 0.18 per cent of GDP. Most of these gains would be concentrated in automobiles, pharmaceuticals, and electronics.  

In an economy where growth has been very low this level of impact is significant. The OBR expects UK GDP growth to be 1.5 per cent each year over the next five years. Against this benchmark, increasing growth by 0.18 per cent is substantial. This could generate substantial benefits for businesses and households.

Finally, we find that an MRA with dynamic alignment, whereby the UK keeps it laws in place with the EU, would provide the greatest economic benefits and be the most palatable to the EU.