Business Maverick

Business Maverick

UK economy 4% smaller because of Brexit, says Office for Budget Responsibility 

UK economy 4% smaller because of Brexit, says Office for Budget Responsibility 
The British flag flies from a tourist souvenir stall on the bank of the River Thames in view of the Houses of Parliament in London on Wednesday, 30 October 2019. (Photo: Luke MacGregor/Bloomberg)

Leaving the European Union had an impact on the UK economy equivalent to the coronavirus pandemic and likely reduced output by 4%, the chairman of the Office for Budget Responsibility told the BBC.

“It’s a shock to the UK economy of the order of magnitude of the sorts of other shocks we’ve seen from the pandemic, from the energy crisis,” Richard Hughes said in an interview with the BBC. “Those have also had percentage-point impacts on the level of output in five or 10 years’ time.”

Economic growth has also been held back by declining productivity, a shrinking workforce, and stagnant investment, which has combined to constrain living standards, said Hughes, who heads the independent forecaster that monitors public spending. 

All economies have had to deal with the pandemic and the conflict in Ukraine but OBR cites the cost of UK’s decision to leave EU as being very expensive too 👇 https://t.co/JaXPNNe9Pv

— Laura Kuenssberg (@bbclaurak) March 26, 2023

The UK voted to leave the EU in 2016 and formally exited in January 2020. The departure has made it harder for some companies to find workers and more difficult for domestic manufacturers to sell into the EU, while also allowing the UK to seek trade deals independent of the EU. The UK is the only developed economy not to have recovered to pre-Covid levels of GDP growth, and is struggling with tight labour market conditions with 600,000 fewer workers than before the pandemic. 

“We’ve seen the biggest squeeze on living standards we’ve faced in this country on record,” Hughes said. “While real income will recover in the next three or four years, it’s still the case that people’s real spending power doesn’t get back to the levels it was before the pandemic even after five years.”

Levelling Up Secretary Michael Gove said on the same programme that both the pandemic and the war in Ukraine have had a huge effect on the economy and that making economic forecasts was “a very difficult exercise.” When asked whether the Conservative Party, which has been in power for 13 years, was responsible for the UK underperforming economically, he said, “one can always do better”. BM/DM

Gallery

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