Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

26 June 2018

OMFIF: EU exit's colossal cost to UK economy


Long-term decline, not short-term crisis, is the core problem for Brexit Britain, predicts Joergen Oerstroem Moeller.

[...] The problem is not whether a contender will challenge May for leadership of the Conservative party or if a general election will be called. The problem is that Britain has become ungovernable. Members of parliament are opting for turf fighting and stubborn pursuit of policies without regard to national interests. [...]

Before the Brexit referendum in June 2016, Britain's economic growth was considerably higher than that of the euro area. Now it is the other way around, with no prospects for reversal. Despite the Remain camp's proclamations before the referendum on Brexit's short-term negative impact, this is not the core problem. Brexit will lead to gradually falling investment, which will depress productivity, competitiveness, employment and economic growth.  [...]

Accumulated over several years, the costs will be colossal. An estimate using International Monetary Fund data points to UK GDP in 2030 being almost 12% lower if UK growth continues to run below euro area growth until that time. The Centre for European Reform estimates the British economy is already 2.1% smaller because of the Brexit referendum.

Two years after the referendum, there is still no clear picture of how the UK views its future relationship with the EU. The Leave vote was imposed on a considerable majority of MPs who would have preferred to stay in the bloc but have the unenviable task of turning the electorate's decision into reality. The same majority supports a close relationship with the EU through some form of customs union, perhaps even access to the single market, but is stymied by minorities in both major parties. It would be a miracle if the UK secures a Brexit solution that majorities in both the electorate and parliament support while avoiding revolts in the Conservative and Labour parties.

 

If, somehow, a miracle does happen, it will be because May has sidled up to form a compromise while devoting little attention to the EU's position. This is risky, to say the least. A compromise among the various political factions in Britain could prove so finely tuned that it cannot be renegotiated if the EU upsets the balance. Going back to form a new agreement inside Britain would, simply speaking, not be possible. 

Full article on OMFIF



© OMFIF


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment