Three years after Brexit, Britain is still waiting for a payoff.
Reuters reports from London. Three years after leaving the European Union, Britain’s economy hasn’t gotten the boost from Brexit that was promised. This is because Britain is behind its peers in trade and investment, among other things.
Britain left the EU on January 31, 2020, but it stayed in the single market and the customs union for another 11 months.
On that day, Boris Johnson, who was prime minister at the time, said that the country could finally reach its full potential and that he hoped people would have more confidence each month.
So far, the opposite has happened. A number of measures show that the economy isn’t doing as well as other economies.
Polls show that the number of Britons who regret leaving the EU is growing faster than the number who don’t. On Monday, the news website UnHerd released the results of a survey that showed this is now true in all but three of the 632 parliamentary constituencies surveyed.
Prime Minister Rishi Sunak, who backs Brexit, is in charge of the government. He says that Britain is doing well with its new freedoms.
Last week, the UK’s finance minister, Jeremy Hunt, disagreed with the idea that the country was going downhill. He said that Brexit offered a brighter future with room for measures that would attract investment in areas like the green economy and technology.
Many economists say that Britain’s problems are not all caused by leaving the EU. For example, the country was hit hard by the coronavirus pandemic. However, leaving the EU is a factor that can help explain Britain’s recent lack of success.
“It’s been going on for a long time. “It’s a big drop in how well the economy is doing,” said John Springford, deputy director of the Center for European Reform.
“If you put up barriers to trade, investment, and migration with your biggest trading partner (the EU), trade volumes, investment, and GDP will all take a big hit,” he said, pointing to a string of bad economic news.
At the end of September last year, which is the most recent time period for which data is available, Britain was the only advanced economy in the Group of Seven that had not yet returned to the size it had before the pandemic in late 2019.
Springford said that by mid-2022, Brexit would have cut Britain’s economic output by about 5.5% compared to what it would have been if it hadn’t left the EU. This was based on a “doppelganger” model, in which an algorithm chooses countries whose economic performance is similar to Britain’s before Brexit.
The Office for Budget Responsibility, which is the government’s own forecasting agency, and the Bank of England both agree that leaving the EU will have a net cost in the long run.
Some economists don’t agree with what most people think.
Gerard Lyons, an economist who supports Brexit and who advised Boris Johnson when he was mayor of London, said it was wrong to blame Britain’s problems on Brexit. Lyons is a consultant for the online platform NetWealth, which helps people manage their money. He worked with Johnson when he was mayor of London.
“Our problems were here before Brexit,” Lyons said, pointing to the fact that Britain has always had a low rate of investment. “Getting the benefits of Brexit depends a lot on coming up with a growth plan, or figuring out how to use your levers after Brexit.”
He didn’t like the “doppelganger” method of analysis because the models picked some small countries that weren’t good comparisons for a big economy like Britain’s.
The data on trade and investment point to other problems with Brexit.
Even though there were high hopes for a “Global Britain” rebalancing of the economy after Brexit, exports, especially of goods, have been disappointing over the last three years.
Since the end of 2019, Canada’s total exports, including services, have grown less than those of any other G7 country.
Boris Glass, a senior economist at S&P Global (NYSE:SPGI), said that increased red tape in UK-EU trade had hurt the competitiveness of smaller British manufacturers the most, since they have fewer resources to deal with it.
“It’s important to note that there are more small exporters in the UK than, say, France or Germany. In that way, they are at a disadvantage “Glass said. “If you’re an exporter with 20 employees, it’s a lot of work to fill out all of these forms. Some of them just can’t keep up.”
Since the Brexit vote in June 2016, business investment has also grown less in the UK than in the US, France, or Germany, according to an analysis by Reuters of data from the Organization for Economic Cooperation and Development.
Some economists who support Brexit say that these numbers don’t take into account the fact that corporate investment in Britain was unusually strong in the years leading up to the middle of 2016 and was bound to slow. But business surveys show that Brexit is the main reason why investment has been low in recent years.
“There doesn’t seem to be any kind of increase in investment, which is a worry. “And I think we need to see that rise if we want a long-lasting recovery from the Brexit shock,” “Springford said.
Britain still has higher employment rates and lower unemployment rates than most other EU countries, but there are some signs that Brexit may have had an effect on the job market as well.
Business groups want the government to make it easier for people to come to the UK after Brexit. This is because companies are having trouble finding workers, which the Bank of England fears is making inflation worse.
And unlike most of its G7 peers, Britain’s employment rate still hasn’t gotten back to where it was before the pandemic.