Almost two years after the UK left the European Union, debate has resurfaced about the consequences of the country’s exit from the European Union. Economists believe that Britain’s exit from the European Union has led to a significant decline in the country’s economic performance, in light of new data showing the consequences of this decision and its impact on economic conditions and politics in Britain. And the vote to leave the European Union made poorer citizens even poorer, hurt business investment, and established new barriers to trade, damaging economic ties between the United Kingdom and the European Union.
While economists disagree about the exact size of Brexit’s impact, they see it as significant. New trade agreements with countries such as Australia have not come close to compensating for the damage. Andrew Bailey, the governor of the Bank of England, told MPs this month that the central bank thinks Brexit will cause a 3% long-term fall in productivity, according to the Office for Budget Responsibility, the financial watchdog. The British economy will face a 4% contraction. %, which negatively affects the British economy.
Some ex-officers have gone further. “In other words, in 2016 the British economy was 90% the size of the German economy, now it’s less than 70%,” said former Bank of England governor Mark Carney. The report faced widespread criticism for its use of the figure. Jonathan Ports, professor of economics and public policy at King’s College London, said the dramatic contraction was due to currency movements, not Brexit. But Ports acknowledged that there is no doubt that the negative effects of Brexit can be seen in both UK economic data and in-depth academic work.
Before the 2016 referendum, Brexiteers such as Daniel Hannan of the Trade Advisory Group worried that closer trading ties with the EU would hold back the UK economy. Britain is “chained to the corpse,” Hannan said. However, since the outbreak of the Covid-19 pandemic, the UK economy has underperformed compared to any other Group of Seven peers, being the only economy not to have recovered in late 2019.
The Organization for Economic Co-operation and Development expects the UK’s performance over the next two years to be worse than any other advanced economy except Russia, particularly from the fourth quarter of 2019 and overall GDP growth in 2019. The third quarter to 2022 shows that the United Kingdom has the lowest growth of the Group of Seven for this period. Despite these comparisons, academic economists worry that such bleak figures could be the result of the effects of COVID-19 or the energy crisis.
To determine the specific economic consequences of Brexit, various methods are used to establish a so-called counter-factual, which is a simulation of the history of the United Kingdom, if it had remained in the EU, and then compared it with reality. The British economy after the Brexit vote.
Now, there is a clear consensus in two specific areas, which allows us to say with certainty that Brexit has affected the prosperity of the United Kingdom. The first part is that the pound sterling fell by more than 10% after the vote to leave Britain in 2016 and has remained at this level ever since. The collapse raised import prices, business costs and inflation, but failed to boost wages, exports or the competitiveness of the British economy.
The resolution also estimated that increased consumption led to higher import prices and higher general inflation. As a result, real wages fell by 2.9%, costing families an average of £870 each year.
A second obvious impact was on business investment, which had been flat in real terms since 2016 before falling due to the fallout from the pandemic. Simon French, chief economist at a British stockbroker, said Brexit had led to higher capital costs for British companies as investors worried about dwindling opportunities to do business in the UK.
French said other countries also saw a weakness in business investment during the pandemic, but the biggest impact was in the United Kingdom, and French added: “Looking at the trends in the EU and the US, there is a significant shortfall. Investment of around £60 billion a year.
More recent academic efforts have attempted to measure the trade impact of Boris Johnson’s Brexit deal and the Trade and Cooperation Agreement, which comes into effect in early 2021. But these efforts have been thwarted by statistical agencies in the kingdom. EU due to disagreements on how to determine the impact of Brexit.
But the results of studies emerging now point to a sharp decline in trade between the UK and the EU, a decline in the diversity of goods traded, a loss of trade links between companies and similar patterns in services.
Thomas Sampson, assistant professor at the London School of Economics, said: “There is strong evidence that Brexit has reduced the UK’s trade with the EU by 15% so far. Other academics are less concerned about the divide between trade with the EU and the rest of the world, suggesting that there is an eventual UK-specific decline in trade performance associated with Brexit. they say
More sophisticated statistical modeling was carried out at Aston Business School English, which revealed a large rebound in imports from the EU to the UK. However, he estimates that exports to the bloc are now 26% lower than they would have been without the new barriers to trade. The impact of this can be seen most clearly in trade in goods such as food exports where there are technical barriers and strict checks at borders.
There was also a significant decline in the number of products traded, down from 70,000 to 42,000 before the new rules came into effect. According to this statistic, smaller companies are more affected because sanctions represent a higher cost in relation to the value of trade.
- Chris Giles, The Financial Times
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