Brexit’s impact on the economy will be worse than that of the Covid-19 pandemic, the chairman of the UK’s independent economic watchdog has said.
Richard Hughes of the Office for Budget Responsibility (OBR) said leaving the EU would reduce the UK’s potential GDP by about 4% in the long term, and the pandemic would reduce it “by a further 2%”.
The BBC reports that Hughes was speaking after yesterday’s Autumn Budget, when the Chancellor of the Exchequer, Rishi Sunak, presented the case for optimism with OBR growth forecasts for 2021 upgraded from 4% to 6.5%, and projections of 6% for next year.
However, there are predictions that inflation could hit almost 5% next year. The OBR’s latest report highlights supply bottlenecks, which it says have been “exacerbated by changes in the migration and trading regimes following Brexit”.
UK slipping
According to a report in the FT, Britain’s export performance is slipping behind other developed countries as the world recovers from the pandemic.
The CPB world trade monitor for August showed global goods trade had rebounded strongly and international statistics showed that export volumes were well above pre-pandemic levels across advanced economies.
The UK was an exception with exports down sharply on pre-pandemic levels, which Jonathan Portes, professor of economics at King’s College London, described as “quite poor”.
He described the export performance as “the single most worrying thing about post-Brexit, post-pandemic developments in the UK economy...because it’s UK specific, unlike inflation, energy prices and so on”.
In the three months to August, exports of UK goods were down 13% compared with the same period in 2019, while services were down 14%. The UK also lagged most advanced economies for exports over the past six years.
Straight to Europe
The Guardian reports that freight traffic from Great Britain to Dublin Port has dropped by a fifth since Brexit as Irish exporters and importers have been bypassing Great Britain to avoid post-Brexit red tape and potential disruption since the beginning of the year.
Dublin port reported a 21% decline in trade with ports in Britain in the first nine months of the year, while there was a 36% increase in business with the EU. The number of direct ferry routes between Ireland and Europe has shot up from seven before Brexit to 44.
Positive signs
Yesterday’s Autumn Budget saw a raft of encouraging indicators for the economy, as covered in the IOE&IT Daily Update.
Growth forecasts for 2021 have been raised from 4% to 6.5%, and the Office of Budget Responsibility (OBR) projects growth will reach 6% next year.
The OBR expects the economy to regain its pre-Covid level by the end of the year, earlier than its previous forecast.
UK exports to the EU returned to pre-Brexit levels in recent months, according to ONS data, reported Yahoo.
Exports to the EU returned to “pre-EU exit levels” in May and June with exports up 9.1% in May to £14.1bn and 1.2% in June to £14.3bn.