Brexit will cost Britain £72 billion in lost economic activity by 2021.
The UK’s annual budget has provided the first concrete estimate of the cost of Brexit for the British economy. The Office for Budget Responsibility published revised GDP growth numbers based on data following the June 2016 referendum. Previously, estimates of the economic impact were of the order of £22 billion per annum, mostly from extra trade tariffs and barriers.
The OBR’s analysis shows a fall in GDP for Britain compared to other major economies.
Robert Chote, Chairman of the OBR in his briefing on the latest economic and fiscal outlook states “real GDP growth has slowed noticeably this year. The fall in the pound following the EU referendum has pushed up consumer price inflation, squeezing household incomes and spending and acting as a drag on the economy. Export growth has picked up a bit, but this has provided only a partial offset and has been accompanied by unexpectedly strong import growth.”
“The slowdown this year is in contrast to the experience of other major industrial economies. Growth in the UK has been weaker so far this year than in the second half of last year. But in the eurozone, the US, Canada and Japan, growth has been stronger this year than late last year — and stronger than in the UK.”
The Resolution Foundation says the gap will represent a loss of £72 billion in 2021:
“The economy is now expected to be roughly £42 billion smaller at the start of 2022 than was thought back in March. This downgrade comes on top of the deterioration pencilled in after the Brexit vote of June 2016. As such, the latest GDP projections point to an economy that will be £72 billion (or 3.4 percent) smaller in 2021 than had been projected in March 2016.”
But the OBR’s downward revisions from March to November of this year all come in the post-Brexit-vote period, and the only thing of macroeconomic substance that changed between then and now was the realisation that the UK is headed toward hard Brexit rather than a trade deal that would keep the country closely tied to the single market.