Brexit chickens come home to roost

A particularly stark report on the cost of Brexit was published on Wednesday by the Centre for European Reform (CER) think-tank. CER deputy director John Springford’s latest report on the impact of leaving the EU on the UK economy estimates that Brexit had, by the second quarter of 2022, reduced the country’s gross domestic product by 5.5 per cent. That is a very big amount indeed.

And Mr Springford calculated that the UK’s tax revenues would be £40 billion a year higher on an annual basis had Brexit not happened.

...Mr Springford’s estimates of the cost of Brexit are based on the “doppelgänger” method, with an algorithm used to select countries with an economic performance closely matching that of the UK before Brexit. The method provides a “counterfactual UK” that did not leave the EU.

In terms of the 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% adrift, goods trade is 7% behind, and services trade is around the same.

Mr Springford said: “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 2021/22 – 34%.”

The UK Government has seemed at pains in recent years to highlight the impact of the coronavirus pandemic, as opposed to Brexit, on the economy.

However, Mr Springford noted: “All of the 22 countries used in the study had almost entirely reopened by June 2022, and yet Britain continued to lag behind the doppelgänger. And, as measured by excess deaths through the pandemic, Britain ranked in mid-table globally – so there’s little reason to believe the long-term scars on the economy are larger than in other countries, on average.”

And he declared that “those who claim Brexit has had no discernible impact on GDP should explain why the UK’s growth rate fell so markedly after the referendum” in June 2016.

Mr Springford said: “If the cost of Brexit is a lot smaller than my estimate, why did the UK’s average quarterly growth rate fall so much more than other advanced economies after the referendum – especially those whose economic performance was similar to the UK’s before 2016?”

The CER research is undoubtedly a very valuable piece of work.