As we approach the 10-year anniversary of the Brexit referendum, it's time to reflect on the economic consequences of this momentous decision. The verdict is in, and it's not a pretty picture for Britain. In this article, I'll delve into the charts and data to uncover the impact of Brexit on the UK's economy, and offer my insights and commentary on what this means for the nation's future.
The Cost of Brexit
Brexit has undoubtedly taken a toll on Britain's economy. The immediate recession predicted by the Treasury's forecasts didn't materialize, but that doesn't mean the long-term effects have been any less severe. Experts, including former Bank of England deputy governor Charlie Bean, agree that the economy has suffered significant losses.
One of the most visible impacts is the devaluation of the pound. The currency's value has never recovered to its pre-Brexit level, which has hit British holidaymakers hard and increased the cost of importing goods, leading to an inflation shock. This has had a ripple effect on households and the public finances.
Slower Growth and Trade Barriers
The UK's growth has slowed significantly since Brexit. Analysis by leading economist Nick Bloom shows that GDP per head is between 6% and 8% lower than it would have been without Brexit. This gap in output compared to other advanced economies is a clear indicator of the economic damage caused by leaving the EU.
Brexit has also erected trade barriers, which have hit goods exports. The EU remains the UK's largest trading partner, but growth in UK goods exports has slowed relative to the G7 since the end of the EU transition period. This is due to the increased friction and red tape that exporters now face, making it more difficult to trade with the EU.
Uncertainty and Investment
Uncertainty surrounding Brexit has had a chilling effect on business investment. The lack of a clear plan and years of political infighting over the practicalities of Brexit led to a freeze in investment plans. As a result, investment is estimated to be almost 18% lower than it would have been under a remain scenario, with productivity also taking a hit.
John Springford from the Centre for European Reform describes Brexit as a story of stagnation and a slow puncture rather than a recession. The uncertainty and lack of investment have had a detrimental impact on productivity and the overall health of the economy.
Employment and Migration
Employment has also suffered post-Brexit. While unemployment initially fell after the referendum, it has since risen sharply, and wage growth has stagnated. Britain has emerged as the worst-performing country in the G7 for its recovery in workforce participation post-pandemic. Young people have borne the brunt of this, with an increase in the number of Neets (not in education, employment, or training).
Net migration has also seen a significant shift. Despite promises to reduce immigration, net migration to the UK rose sharply post-Brexit, reaching a record high. However, this has now fallen, with tougher migration controls introduced by the Conservative and Labour governments.
Public Support and the Future
Public support for Brexit has faded over the years. Recent polling shows that a majority of Britons now support a closer relationship with the EU, with many even backing rejoining the bloc outright. This shift in public opinion suggests that the economic realities of Brexit are becoming increasingly clear.
In my opinion, the data and charts paint a clear picture of the economic consequences of Brexit. The UK is poorer, growth has slowed, trade has suffered, and uncertainty has impacted investment and employment. While some may argue that the immediate recession didn't happen, the long-term costs are undeniable. As we move forward, it's crucial to learn from these lessons and consider the broader implications for Britain's future.
