Later that day, Johnson won by a landslide, but only after 41 percent of lawmakers voted in favor of ousting him from Downing Street. He’s safe at the moment, but his prime minister’s decisive plan – Brexit – is still hanging like a cloud over Britain’s fragile economy. Johnson may not want his party to “recall” Brexit, but neither can Sir Kir Starmer, the leader of the opposition Labor Party, about a third of whose supporters voted to leave in the 2016 referendum. of the Bank of England. Rishi Sunak, the chancellor, would rather talk about something else. Brexit has become the big British taboo. But as the sixth anniversary of the UK vote to leave the EU approaches, economists are beginning to quantify the damage caused by trade barriers with its largest market, separating the “Brexit effect” from the damage caused by the Covid-19 pandemic. They conclude that the damage is real and is not over yet. Business ventures, seen by Boris Johnson and Rishi Sunak as the panacea for poor growth, follow other industrialized countries © Scott Heppell / Reuters The United Kingdom lags behind the rest of the G7 in terms of trade recovery after the pandemic. Business investment, seen by Johnson and Sunak as a panacea for a sluggish growth rate, is being followed by other industrialized nations, despite rich government tax cuts trying to boost them. Next year, according to the OECD think-tank, the United Kingdom will have the lowest growth in the G20, apart from Russia. The Office for Budget Responsibility, the official British meteorologist, saw no reason to change its forecast, first made in March 2020, that Brexit would ultimately reduce productivity and the UK gross domestic product by 4%. one hundred compared to a world where the country remained within the EU. He says a little over half of that damage has not yet happened. This level of reduction, worth about 100 100 billion a year in lost production, would result in a loss of revenue for the Treasury of 40 40 billion a year. That’s 40 40 billion that besieged Johnson could have at his disposal for the radical tax cuts demanded by the Tories right – the equivalent of π 6 out of π 20 in the pound’s basic income tax rate.
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Despite this discouraging evidence, Johnson’s complaints about the prospect of a “repeat” of Brexit were exaggerated, with the aim of presenting him as the victim of an alleged conspiracy by MPs in favor of Remain. In fact, British politicians – and the wider country – are still traumatized by the bitter Brexit epic and deeply reluctant to see it again. However, this month saw the first upheaval of a debate that had hitherto been buried as evidence of Brexit-induced financial self-injury began to pile up. Few talk of a complete reversal of Brexit, but another question arises: should the UK begin exploring ways in Brussels to soften its extremes?
Show, do not say
Downing Street insisted this week that it was “too early to judge” whether Brexit would have a negative impact on the economy, which could lead to a recession. “The opportunities offered by Brexit will be a boon to the UK economy in the long run,” said Johnson’s spokesman. Both Johnson and Sunak insist it is difficult at this stage to separate Brexit’s economic impact from Covid’s shock. Meanwhile, the prime minister is promoting the “benefits of Brexit”, such as new trade agreements with Australia and New Zealand and the freedom of the United Kingdom to set its own rules. Sunak has promised a reform of rules in the City of London, including a reform of the EU’s Solvency II rules to allow insurers to spend more money on infrastructure. It has announced eight new freeports with special tax benefits. However, economists have not yet been able to find significant positive effects of these policies. Some, including Johnson’s patriotic promise to put a “crown seal” on pint glasses in pubs and allow merchants to sell their products in pounds and ounces, are mostly symbolic. Johnson promised to put a “crown seal” on pint glasses in pubs and allow merchants to sell their products in pounds and ounces © Ben Birchall / PA Critics of government policy on Brexit are often ridiculed. Attorney General Suela Braverman last week accused ITV presenter Robert Peston of “construction” after questioning her about the government’s unilateral plan to overturn the Brexit treaty on Northern Ireland. Braverman claimed that the so-called Northern Ireland Protocol had left the region “behind the rest of the United Kingdom”. In fact, Northern Ireland (the only UK region remaining in the EU single goods market) is the part of the country with the best performance, apart from London. When Bailey appeared before the House Finance Committee in mid-May, the BoE governor acknowledged that Mark Carney’s predecessor had become “unpopular”, saying that Brexit would have a negative impact on trade, but that the bank this opinion. Kevin Hollinrake, a member of the Tories committee, said Bailey was trying to avoid becoming a political target and “deliberately avoided” talking about Brexit. “It’s a unique issue for the United Kingdom,” he said. “We have changed the rules of immigration. These are non-tariff barriers. “You have to be willing to see what happens on the ground.” Kwasi Kwarteng, business secretary, recently focused on the UK’s ability to respond quickly to Russian aggression in Ukraine © Sharron Floyd / PA While some bleak forecasts have failed to materialize, such as former Chancellor George Osborne warning in 2016 of a recession shortly after the exit vote, there is growing evidence that Brexit is causing more permanent damage to the UK’s economic outlook. Ministers are becoming increasingly reluctant to declare the economic benefits of Brexit. Kwasi Kwarteng, business secretary, was invited to the FT Global Boardroom last week to list some of the benefits of Brexit. It focused on the UK’s ability to respond quickly to Russian aggression in Ukraine – “it has significant benefits especially in international politics” – rather than business. Sunak’s allies say the chancellor’s approach is to “show, not say” about Brexit, promoting the city’s regulatory reforms instead of giving supportive rhetoric about its economic strengths.
The impact on data
The first and most obvious economic blow from Brexit came when sterling fell almost 10 percent after the June 2016 referendum, against currencies that matched the UK import standard. He did not recover. This sharp devaluation was not followed by an explosion in exports as UK products and services became cheaper on world markets, but increased the price of imports and boosted inflation. By June 2018, a team of academic economists at the Center for Economic Policy Research estimated that there was an effect of Brexit inflation, raising consumer prices by 2.9%, with no corresponding increase in wages. Some households, such as those based on state pensions, were compensated with higher benefits, but the CEPR team did not find total compensation with higher incomes. “The Brexit vote caused a rapid negative shock to the UK’s standard of living,” they wrote. While the UK was still in the EU during the “Brexit transition”, there were no significant effects on trade flows. But that has changed since stricter border controls were introduced in early 2021, with no customs duties, but significant controls and controls at the former border without friction. Johnson may not want his party to “recall” Brexit, but neither may Sir Keir Starmer, leader of the opposition Labor Party © Charles McQuillan / Getty Images Economists have used this point in time to compare how the UK’s commercial performance compares to that of other countries before and after the imposition of the TCA. The results were getting worse, especially for small companies doing business in Europe. The bureaucracy caused a “sharp drop” in the number of business relationships after January 2021, according to a study by the Center for Economic Performance at the London School of Economics. The number of buyer-seller relationships fell by almost a third, as found. The same group found that food prices had risen as a result of Brexit. Comparing the prices of imported foods such as pork, tomatoes and jam, which came mainly from the EU, with those from more distant countries such as tuna and pineapples, he found a significant Brexit effect. “Brexit increased average food prices by about 6% in 2020 and 2021,” according to the survey. Summing up the effects on trade in which EU imports fell while exports did not rise, Adam Pozen, head of the Peterson Institute for International Economics, says “everyone else is seeing a recovery in trade after Covid and the UK remains stable”. .
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The third visible impact of Brexit on the UK economy was the discouragement of business investment. In the first quarter of 2022, real business investment was 9.4 percent lower than in the second quarter of 2016. This decline was mainly due to Covid, but was flattened by the referendum, ending a period of growth from 2010 and far behind the performance of other G7 …
