Brexit's economic damage is getting real

Press quote (Bloomberg)
09 October 2018

The Centre for European Reform’s John Springford has taken the Born-led model a step further. The CER approach uses not just GDP, but also other attributes of 22 advanced economies — including the inflation rate, openness to trade, investment ratio and how well-educated the population is — to create a doppelganger U.K. that most closely matches the country’s economy before the referendum. Based on that methodology, the CER puts the cost of Brexit at 2.5 percent of GDP.

Lower growth means lost income for the government, meaning it has to borrow more to meet its spending goals. Whitehall’s own analysis showed that 1 percent of lost GDP resulted in 11 billion pounds of extra borrowing. So Springford’s calculation of a gap of 2.5 percent would equate to 26 billion pounds of additional borrowing on a yearly basis, or 500 million pounds a week. Even with the model’s margin of error, it’s a striking result.

“If Britain had voted to Remain, our analysis suggests that the U.K. government deficit would largely have been eliminated by Brexit day” on March 29, Springford told me. “If Theresa May fails to land a deal by then, the costs to both the economy and the public finances will be even greater.”