LONDON (Reuters) – It has been exactly three years since Britain left the European Union on January 31, 2020, and a full two years since its transitional exit from the European Union on January 31, 2021. But he has yet to receive the promised Brexit dividend. Rather, the reality is that Britain pales in comparison to other developed countries in terms of trade and investment.
Three years ago, then-Prime Minister Boris Johnson declared: Britain would finally show what it was capable of, and confidence in the future would grow day by day.
So far, however, the opposite has happened, with a range of indicators all pointing to weaker economic growth in the UK. Opinion polls show that more people say they regret leaving the EU than those who say they don’t.
The current Sunak government insists that Britain continues to thrive with its newly established freedoms. Chancellor Hunt said last week that Brexit had given the UK a brighter future by giving it room to implement policies to attract investment in areas such as the environment and high-tech.
Many economists believe that Brexit is not necessarily the only cause of Britain’s predicament. The coronavirus pandemic and soaring gas prices after Russia’s invasion of Ukraine have also hit hard. But one of the reasons why the economy is not doing well these days can be explained by calling it Brexit.
“It’s not just a slow burn, it’s a significant drop in economic performance,” said John Springford, deputy head of the Center for European Reform (CER) think tank. Pointing to the fact that very poor economic data has been one after another, if barriers are set between trade, investment, and movement of people with the EU, which is the largest trading partner, trade volume, investment, and gross domestic product (GDP) will increase. said it would be hit hard.
As of the end of September, the most recent data available, the UK was the only G7 economy that had not recovered to its pre-pandemic size.
The International Monetary Fund (IMF) said on Wednesday that the UK would contract by 0.6% this year, while the rest of the G7 countries will maintain positive growth.
Mr Springford estimated that Brexit had left Britain’s economic output about 5.5% lower than it would have been if it hadn’t left the EU in the middle of last year.
The UK government’s Office for Budget Responsibility (OBR) and the Bank of England (BOE) also appear to have long-term Brexit net costs.
Some economists disagree with this prevailing view.
Gerard Lyons, a pro-Brexit economist and former adviser to Mr Johnson when he was mayor of London, said blaming Brexit for Britain’s problems was a mistake. “Our problems predate Brexit,” he said, referring to chronically low levels of investment. He added that to capitalize on the benefits of Brexit, companies must seize the opportunity and implement effective growth plans.
Trade and investment data point to another Brexit problem.
Hopes that Brexit will open up the UK economy to the world are in vain, with goods exports in particular disappointing over the past three years. Growth in total exports, including services, is the lowest in the G7 since late 2019.
Boris Glass, senior economist at S&P Global, said the increase in paperwork related to trade between Britain and the EU has hurt the competitiveness of small and medium-sized British manufacturers, especially those with scarce resources to handle them.
“For example, it is worth noting that the UK has more small and medium-sized exporters than France or Germany. The burden of creating this is extremely heavy, and there are some who will not be able to compete at all.”
A Reuters analysis of Organization for Economic Co-operation and Development (OECD) data shows business investment in the UK has also lagged behind that of the United States, France and Germany since the referendum in mid-2016 when Britain voted to leave the EU.
Brexit supporters say they overlooked the fact that business investment in the UK had been unusually strong for several years until mid-2016.
But multiple business surveys show that Brexit is definitely one factor behind the weakness in investment in recent years.
“It is worrisome that we do not see investment picking up,” Springford said.
