UK already up to £66bn poorer because of Brexit vote, study shows

Hit to national income – around £420m a week – greater than Boris Johnson’s discredited claim of a £350m boost to be lavished on the NHS

Rob Merrick
Deputy Political Editor
Tuesday 08 October 2019 07:35
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Countdown to Brexit: How many days left until Britain leaves the EU?

The UK is already up to a staggering £66bn poorer because of the Brexit vote after economic growth evaporated, experts warn today.

The huge loss means the hit to national income – around £420m a week – is greater than Boris Johnson’s discredited claim that leaving the EU would deliver a £350m boost for the NHS.

Instead, the nation’s wealth has slumped by between 2.5 per cent and 3 per cent, a loss of £55–£66bn, in the three years since the June 2016 vote, the Institute for Fiscal Studies has concluded.

“We suspect the UK has missed out almost entirely on a bout of global growth, which would normally have boosted exports and investment,” its devastating report says.

The IFS’s ‘green budget’ also highlights the “hugely damaging” hit to private sector investment from the vote to leave the EU – after it slumped by up to 20 per cent.

It adds up to the most sustained fall outside of a recession and has left the UK with the lowest business investment growth of any country in the elite G7 group.

Crucially, even a Brexit deal, now increasingly unlikely with the EU poised to reject Mr Johnson’s proposals, would deliver “weak” growth at around 1.5 per cent a year.

“Remaining in the EU would be best for growth,” the study concludes – although the benefit could be wiped out by Labour’s plans to hike tax, nationalise industries and tighten labour market regulation, it argues.

The economic damage from the Brexit vote – even before the UK actually leaves the EU – is the result of the plunging pound squeezing household incomes and uncertainty hitting investment.

The new assessment will strengthen criticism that the pre-referendum warnings of the consequences, branded ‘Project Fear’ by Brexit supporters, in fact reflect the reality of what has happened.

“The UK economy is already around £60bn smaller than it would have been without a vote to leave the European Union,” said Christian Schulz, chief UK economist at the bank Citi, which helped compile the report.

He said failing to end the Brexit impasse would leave growth at just one per cent a year, but added: “A Brexit deal is a little better, leaving growth at 1.5 per cent.”

The ‘green budget’ also paints an alarming picture of the state of the nation’s finances, after the chancellor declared that austerity was over, including:

* Borrowing set to be more than £50bn next year – more than double the official forecast as recently as March.

* At 2.3 per cent, this would breach the ceiling of 2 per cent of national income, imposed by the chancellor’s own fiscal rules.

* Even a “relatively benign no-deal Brexit” would send borrowing close to the £100bn mark – and debt to almost 90 per cent of national income for the first time since the mid 1960s.

* If the crash-out happens, bringing an economic slump, next year’s mini-boom in public spending “would likely be followed by another bust”.

* Austerity continues for public services, excluding health – with day-to-day spending 16 per cent lower next year than when the Conservatives came to power in 2010.

* Nevertheless, Sajid Javid’s spending plans are “close to the levels implied by Labour’s 2017 manifesto”, being far higher on the NHS, slightly higher on the police and “broadly matching” the party’s promises for schools.

Paul Johnson, the IFS director said: “The government is now adrift without any effective fiscal anchor.

“Given the extraordinary level of uncertainty and risks facing the economy and public finances, it should not be looking to offer further permanent overall tax giveaways in any forthcoming Budget.”

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