Brits believe Brexit was a mistake; UK economy agrees

Key Takeaways:

  • UK economy is suffering from the long term harm of Brexit.
  • UK's trade intensity is down and economic recovery is nearly the slowest of all G-20 countries.
Brexit is hurting the UK economy, but Britain rules out rejoining the EU
Brexit is hurting the UK economy, but Britain rules out rejoining the EU. Image from Pixabay

NEW DELHI ( — It has been more than six years since the UK distanced itself from the European Union, or Brexit, but the UK economy continues to suffer from the long-term harm of the decision.

The country is facing its sharpest fall in living standards since records began. Moreover, the UK government announced a $65.5 billion program of tax hikes and spending cuts.

The opposition Labour Party has been criticizing the Conservative government’s fiscal policies but still ruled out a return to the EU’s single market or customs union if it comes to power after the 2025 elections.

Labour Party leader Keir Starmer promised that the party would try to soften the impact of Brexit. However, both parties seem to view the idea of re-opening a Brexit debate as a vote-bank killer.

Ministers in the UK government blame the energy crisis born out of Russia’s war on Ukraine and the lingering effects of the Covid-19 pandemic for the country’s economic woes.

UK Economic Recovery One Of The Slowest Due To Brexit

UK’s economic growth has been one of the slowest among the world’s largest economies since the Covid-19 pandemic. Moreover, the country is below the Organisation for Economic Co-operation and Development (OECD) average, per the agency’s latest report.

UK’s gross domestic product has contracted by 0.4% between Q4 2019 and Q3 2022. In comparison, the cumulative growth of the 38-member organization was 3.7%. Additionally, among the G-7 nations, only the UK recorded a decline.

Consumer confidence and economic indicators chart for the UK
Consumer confidence and economic indicators chart for the UK. Source: OECD report

The OECD report predicted a shallower recession for the UK, while the Office for Budget Responsibility (OBR), an independent fiscal watchdog, predicted a deeper recession with a stronger rebound. OECD report suggests that a recovery from the recession would only be possible in 2024.

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OECD emphasized that raising productivity was vital to ensure sustained growth, stating

To ensure sustainable growth, the government should also continue to implement its productivity enhancing “Plan for Growth” to support a shift towards greener and more inclusive growth through large-scale public investment in infrastructure, skills and innovation.

Meanwhile, the OBR blames Brexit for UK’s dismal performance in trade, as the move cut ties and relationships between the UK and EU companies.

In its Economic and Fiscal Outlook report, the OBR noted that its forecast included an assumption that Brexit would result in UK’s trade intensity falling by 15% lower in the long run.

Additionally, the OBR estimated that the UK’s new terms of trade with the EU would reduce long-term productivity by 4% relative to remaining in the EU.

UK's trade intensity has suffered post-Brexit.
UK’s trade intensity has suffered post-Brexit.

Former Bank of England policymaker, Michael Saunders, agreed with OBR’s projections. In an interview, Saunders noted that the declining trade intensity was a major factor in weakening the UK economy. The share of trade in the UK’s GDP has dropped from nearly 63% in 2019 to roughly 55% in 2021.

At the same time, domestic productivity has stagnated. As a result, the Bank of England and the OBR predict sluggish growth for the UK’s potential output.

UK Suffering As Politics Wins Over Economics

Living standards in the UK have plummeted to all-time lows. Comparing living standards in major European economies, the UK has outperformed only Spain. The OBR estimated that real household disposable income would fall by 4.3% in 2022-23.

The decline in living standards would be the UK economy’s sharpest since the Office for National Statistics (ONS) began maintaining records.

Living standards in the UK have below levels seen before Brexit.
Living standards in the UK have below levels seen before Brexit.

The OBR expects unemployment to rise from 3.5% to 4.9% in Q3 2024. Meanwhile, nominal wage growth increased in 2022 but failed to prevent a fall in wages, which has squeezed household incomes.

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The Sterling has fallen roughly 20% against the USD and 11% against the Euro. Early in Nov, the Paris bourse overtook the London Stock Exchange in market worth. A recent YouGov poll found public support for Brexit had fallen to a record low of 32%, while 56% believe the decision was wrong.

Despite public opinion, the parliamentary arithmetic would likely result in the UK shunning the idea of aligning with EU rules. Prime Minister Sunak asserted that the “United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws.”

Chancellor Jeremy Hunt admitted that Brexit had thrown the spanner in UK economic growth. However, Hunt claimed that the UK economy would likely recover from “the vast majority” of them over time.

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UK economy, Brits believe Brexit was a mistake; UK economy agrees

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