The Cost of Brexit on the UK Economy: A Study by Bloomberg Economics
Three years after Britain’s exit from the European Union, a new analysis by Bloomberg Economics has painted a grim picture of the impact of Brexit on the UK economy. The study reveals that Brexit is costing the UK £100 billion ($124 billion) a year in lost output, with the effects spanning a wide range of economic factors, from business investment to the ability of companies to hire workers.
The findings of the study indicate that the UK economy is 4% smaller than it could have been, primarily due to the lagging business investment and the reduction in EU workers in the country. The economists behind the study, Ana Andrade and Dan Hanson, conclude that “The main takeaway is that the rupture from the single market may have impacted the British economy faster than we, or most other forecasters, expected.”
The study casts doubt on Prime Minister Rishi Sunak’s recent assertions that Brexit presents a “huge opportunity” for the UK. While Sunak highlighted the UK’s ability to create freeports to spur trade and reform financial services rules, the study suggests that these potential benefits may not outweigh the negative effects of Brexit on the economy.
Calculating the exact impact of Brexit on output is a challenging task, as the study acknowledges, particularly as Brexit coincided with the global disruptions caused by the COVID-19 pandemic. Nevertheless, it is clear that the UK’s economic performance has diverged from that of the rest of the Group of Seven since the Brexit vote, with business investment lagging behind by 9% of GDP, compared to the Group of Seven average of 13%.
The shortages of workers in the UK, estimated by Andrade and Hanson to be 370,000 fewer EU workers in employment than there would have been if the UK had remained in the single market, have also contributed to the negative impact of Brexit on the economy. The economists note that “scarcity of labor adds to inflationary pressure in the short-term and constrains potential growth further out”.
In terms of trade, the impact of Brexit appears to be less negative, although the study cautions that “over the longer term, we would expect trade to bear the brunt of the impact of leaving the single market.” The economists conclude that the barriers imposed with the EU in 2021 have driven a wedge between the UK and the G-7’s trade performance, but the gap may not be as significant as initially expected.
In conclusion, the study by Bloomberg Economics highlights the significant impact that Brexit has had on the UK economy in the three years since its exit from the European Union. The reduction in business investment, shortage of workers, and negative impact on output suggest that the UK may have committed an “act of economic self-harm” in voting to leave the EU. While the long-term impact of Brexit on the economy remains to be seen, the study presents a bleak outlook for the UK’s economic future in the aftermath of Brexit.