Bloomberg's Winkler: Brexit’s Lasting Damage Is Looking Inescapable

19 March 2024

By almost every economic and financial measure, parting ways with the EU almost eight years ago has been disastrous for the UK. Is there no end in sight?

Leaving the European Union was unlike any event in modern British history. Institutional investors couldn't imagine a majority of Britons voting against their own interest. When they did, the shock was immediate. The pound plummeted a record 8.05% in minutes to a 31-year-low against the dollar. The toll of the June 23, 2016, referendum was more than double any of the eight worst days since 1981, and the almost 13% depreciation in less than a week remains unequaled as a UK foreign-exchange debacle.

Sterling's sudden collapse and failure to recover proved to be the signal that Britain's best days are fleeting. For most of this century, the UK was the biggest beneficiary among the 27 countries in the EU. Measured by gross domestic product, GDP per capita growth, unemployment and superior debt, equity and currency valuations, Britain was the perennial leader. All of these superlatives ended with “Brexit” almost eight years ago. The EU since then outperforms the UK, whose listless economy is now little more than an also-ran.

The EU, which soon gets the chance to re-elect Ursula von der Leyen to five more years as president of the European Commission, is at its highest valuation relative to the UK since she began her initial term as its leader in 2019 based on publicly-traded equities, according to data compiled by Bloomberg. The average premium investors pay for the future profits generated by the stocks in the 20 countries sharing the euro currency, known as the euro zone, is 25% as measured by 197 companies in the Bloomberg Eurozone Index and 71 members in the Bloomberg UK Index. Between 2006 and 2019, the average premium was zero, showing that investors perceived no difference between the corporate euro zone and corporate UK. It was only in 2020, during the Covid-19 global pandemic, when the EU's favorable relative value suddenly surged to 19% and continued to climb after Russia invaded Ukraine....

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