The CER estimate has dipped slightly because UK growth outperformed that of our ‘doppelgänger UK’ – a group of countries whose economic characteristics match Britain’s. As these countries did not hold a referendum in 2016, we can compare them to the UK to assess the cost of Brexit. The British economy grew by 0.6 per cent in the three months to September 2018, its fastest rate since the last quarter of 2016. But our doppelgänger includes Germany, which had a bad third quarter, with its economy shrinking by 0.3 per cent.
Quarterly GDP growth is variable, and poor performance in one country in one quarter can affect the results. This is why it is important to interpret this analysis as a central estimate with a margin of error around it, as discussed below.
However, the basic story is unchanged: Britain’s decision to leave the EU damaged growth, largely thanks to higher inflation and lower business investment. The UK missed out on a broad-based upturn in growth among advanced economies in 2017 and early 2018. And the economic cost of the decision so far is sizeable, if not disastrous. [...]
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