London (Reuters) – Due to Brexit, Britain’s economy is becoming more closed. A study said on Wednesday that this will hurt productivity and wages in the long run, making the average worker $577 ($470) poorer each year by the end of the decade.
Swati Dhingra, an associate professor at the London School of Economics who will join the Bank of England’s Monetary Policy Committee in August, and researchers from the Resolution Foundation think tank wrote the report.
The COVID-19 pandemic, which started right after Britain left the EU in January 2020, has made it harder to figure out what the effects of Brexit will be.
The new trade rules that went into effect after Brexit in January 2021 did not cause British trade with the EU to fall compared to trade with the rest of the world, the researchers said. This was contrary to what many analysts had thought would happen.
“Instead, Brexit has had a wider range of effects by making the UK less competitive and less open to trade with more countries.” “This will hurt workers’ productivity and real wages in the long run,” “Resolution Foundation economist Sophie Hale said.
In response to the report, Britain’s government said that it was working on new laws to boost growth and that trade with the EU was now above what it was before the pandemic.
A spokesperson said, “Since we left the European Union, we have started to take advantage of new opportunities to improve UK regulations for businesses and consumers by making plans to increase competition and use new technology.”
When Britain sends goods to the EU, there are no tariffs, but there are more rules that make it hard.
The report said that the overall effect of these changes would be to cut the economy’s productivity by 1.3% by 2030, compared to what would happen if the trade relationship stayed the same. This would mean that each worker’s annual pay would drop by 1.8%, or 470 pounds, if the trade relationship stayed the same.
Changes to immigration rules are not taken into account in these numbers.
For some areas, the effects will be much more clear. The report said that Britain’s small but well-known fishing industry, whose members pushed hard for Brexit, was likely to shrink by 30% because it would be hard to ship fresh fish to customers in the EU.
Professional services like finance, insurance, and law, on the other hand, will find it harder to serve EU clients, but their share of the British economy is only likely to drop by 0.3%, to 20%.
($1 equals 0.8515 pounds)
