Britain's GDP now 5.5% smaller than it would have been without Brexit, think-tank claims

Britain’s GDP was 5.5% smaller by the second quarter of this year than it would have been without Brexit, a think-tank claims.

In his analysis for the Centre for European Reform, John Springford also says that almost all the tax increases announced by Rishi Sunak when he was chancellor in March would not have been needed if the UK had enjoyed the extra tax revenue it would have got from higher growth if it had stayed in the EU.

Sprinford says his analysis is based on the the ‘doppelgänger’ method, which involves finding countries whose economic performance closely matched the UK’s before Brexit and then using their performance since to estimate what might have happened to doppelgänger UK if it had stayed in the UK.

Springford says: The method provides a counterfactual UK that did not leave the EU. Chart 1 shows quarterly estimates of the cost of Brexit to the second quarter of 2022. UK GDP is 5.5% lower than that of the doppelgänger. Investment is 11% lower; goods trade, 7% lower; and services trade is around the same.

The Brexit hit has inevitably led to tax rises, because a slower-growing economy requires higher taxation to fund public services and benefits. If Brexit had not happened, most of the tax rises that then chancellor Rishi Sunak announced in March 2022 would not have been necessary. If the UK economy had grown in line with the doppelgänger, tax revenues would have been around £40bn higher on an annual basis (if we apply the same tax-to-GDP ratio as in 2021-2 – 34%). In his March 2022 budget, Sunak announced tax rises of £46bn.

When Springford last published an analysis like this, in June, it said that the UK’s GDP was 5.2% lower at the end of 2021 than it would have been without Brexit.