- Brexit will cost Britain £72 billion in lost economic activity annually, according to an analysis of government figures.
- Leaving the EU is already dragging down the British economy.
- The UK is now growing more slowly than Japan or Italy.
LONDON – Chancellor Philip Hammond’s annual budget, presented yesterday, has finally given Britain the first concrete numbers on the cost of Brexit.
The government’s Office for Budget Responsibility published revised GDP growth numbers based on data following the June 2016 referendum. Those new estimates suggest that Brexit will cost Britain £72 billion in lost annual economic activity by 2021, according to an analysis by the Resolution Foundation.
Previously, the best estimate of the economic damage leaving Europe will inflict on the UK came from a private estimate by one of Secretary of State for Exiting the European Union David Davis’s advisors, of about £22 billion per year, mostly from extra trade tariffs and barriers.
Here are the new GDP charts from the OBR.
They show other major economies such as the US, the EU, and Canada all growing faster now than they were in the six months prior to the Brexit referendum in 2016. Only in the UK has growth slowed, as the pound lost value and investors hit the pause button. Even Japan, an infamous economic basket case hobbled by years of stagnation, is doing better than the UK:
In terms of sequential GDP growth through Q3 2017, Britain now lags France and debt-ridden Italy, too. This chart comes from Pantheon Macroeconomics:
- Pantheon Macroeconomics
This next chart shows how much we are forecast to lose in GDP activity every year, based on the difference between the OBR’s previous estimate in March and its new estimate, from updated post-referendum data:
The Resolution Foundation says the gap will represent a loss of £72 billion in 2021:
“The economy is now expected to be roughly £42 billion smaller at the start of 2022 than was thought back in March. This downgrade comes on top of the deterioration pencilled in after the Brexit vote of June 2016. As such, the latest GDP projections point to an economy that will be £72 billion (or 3.4 percent) smaller in 2021 than had been projected in March 2016.”
That’s £72 billion in lost jobs, revenues, consumer spending, and so on.
There are other factors at play, of course. A big one is the UK’s chronic lack of productivity, exacerbated by its refusal to allow in the young immigrant workers to generate the income tax receipts its ageing population needs to pay for the NHS and its state pensions.
But the OBR’s downward revisions from March to November of this year all come in the post-Brexit-vote period, and the only thing of macroeconomic substance that changed between then and now was the realisation that the UK is headed toward hard Brexit rather than a trade deal that would keep the country closely tied to the single market.