They agree that leaving the bloc has made households poorer, that negotiating uncertainties have taken their toll on business investment and that new barriers to trade have damaged economic links between the UK and EU. But, while economists and officials disagree on the precise magnitude of the Brexit effect, they consider it significant. «Put it this way, in 2016, the British economy was 90 per cent the size of Germany's,» said Mark Carney, former BoE governor. «Now it is less than 70 per cent».
Carney has been widely criticised for using this statistic, with Jonathan Portes, professor of economics and public policy at King's College London, saying the dramatic contraction stemmed from currency movements, not Brexit. But Portes acknowledges there is no doubt that the adverse effects of Brexit can be seen in economic data and in-depth academic work. Before the 2016 referendum, Brexiters such as Lord Daniel Hannan, an adviser to the Board of Trade, worried that having close trade ties with the EU held back the UK economy. The OECD expects UK performance over the next two years to be worse than any other advanced economy bar Russia.
In two areas, there is a clear consensus that the Brexit hit to UK prosperity was, as Swati Dhingra, an external member of the BoE's Monetary Policy Committee, recently remarked, «undeniable». First, sterling depreciated more than 10 per cent after the Brexit vote and has not recovered. This drop raised import prices, business costs and inflation but failed to boost wages, exports or the economy's competitiveness. The Resolution Foundation estimated that real wages fell 2.9 per cent due to the depreciation, costing households £870 a year on average.
«There is strong evidence the TCA has reduced the UK's trade with the EU around 15 per cent so far,» said Thomas Sampson, associate professor at the London School of Economics. UK trade with the rest of the world had decreased by similar amounts, leading him to be «not 100 per cent convinced we've seen an effect on exports so far». Other academics are less worried about the split between trade with the EU and the rest of the world, saying there has been a definitive UK drop in business coinciding with Brexit. Martina Lawless, a research professor at Ireland's Economic and Social Research Institute, said Brexit had been «substantially negative» for the UK, with her estimates showing declines in EU imports and exports of «close to 20 per cent».
Ministers have rejected the economic evidence. Jeremy Hunt, the chancellor, said last week that he did not accept the OBR's estimate that Brexit had caused a 4 per cent hit to the economy. Economists say this is scant compensation for the economic losses the country has suffered. «We know now that Brexit has made UK households worse off by raising the cost of living, and it has made life harder for UK firms, and this has made the UK poorer,» said Sampson.
They can contradict themselves all day long, most people can easily see and feel Brexit was a mistake and has done many bad things to the UK economy. You can feel it when you go shopping, when you pay taxes, when you feel the pound not being as powerful as it once was.
ReplyDeleteYes, even people who voted for Brexit and were very for it back then are now regretting their decision. Some say they didn't really understand what Brexit actually meant.
DeleteThere are many, many people that didn't know what they were voting for. The Government did a poor job at explaining what this was and what effects this would have. They didn't understand themselves or had other interests at heart.
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