Brexit will hurt Britain’s competitiveness, hurt productivity and slash workers’ wages for the rest of the decade, according to a damning new study.
The report by the Resolution Foundation think tank, working with the London School of Economics, said leaving the EU would make Britain “poorer” in the 2020s.
The study says the immediate impact of Brexit was already clear, with a “depreciation-induced spike in inflation” raising the cost of living for households and reducing investment.
The research estimated that labor productivity will be reduced by 1.3% by the end of the decade due to changes in trade rules, which will contribute to lower wage growth.
Economists said the real wage must be £470 per worker lower each year, on average, than it would have been if Britain had chosen to stay in the EU.
Output in the UK fishing industry is set to fall by 30% and some workers will face “painful adjustments” over the next decade, the Resolution Foundation has said.
The report also adds that the North East of England – part of the red wall that Boris Johnson’s Tories were able to turn blue in the last election – is set to be hardest hit by Brexit, as its businesses are particularly dependent exports to the EU.
The UK may not have seen the sharp relative drop in exports to the EU that some were predicting, but imports from the EU have fallen faster than those from the rest of the world, according to the study.
The report says Britain has seen an 8% drop in ‘trade openness’ – trade as a share of economic output – since 2019, losing market share in three of its biggest markets. import of goods from outside the EU in 2021, the United States, Canada and Japan.
The full effect of the trade and cooperation agreement (TCA) reached with the EU will take years to be felt, say the authors, but it is clear that the nation is moving towards a more closed economy.
Sophie Hale, senior economist at the Resolution Foundation, said Brexit represented “the biggest change in Britain’s economic relationship with the rest of the world in half a century”.
She said: ‘It has led many to predict that it will lead to a particularly big drop in exports to the EU and fundamentally reshape the UK economy towards more manufacturing.
“The first of them didn’t happen, and the second seems unlikely to,” the economist added.
“Instead, Brexit had a more diffuse impact by reducing the UK’s competitiveness and openness to trade with more countries. This will ultimately reduce productivity, as well as workers’ real wages.
It follows a recent study by the Center for European Reform (CEF) which found that Brexit was “largely responsible” for the loss of billions of dollars in trade and tax revenue in recent years.
The think tank said that at the end of last year the UK economy was 5.2% – or £31bn – smaller than it would have been had it not been for Brexit and the coronavirus pandemic. Covid.
“We can’t blame Brexit for the entire 5.2% of GDP deficit…but clearly Brexit is largely to blame,” said John Springford, author of the CEF study. .
It comes as Mr Johnson’s government has been accused of hypocrisy for planning to cut pay checks for city bosses while calling for wage moderation in the public sector.
No 10 chief of staff Steve Barclay has reportedly written to Chancellor Rishi Sunak with a plan for ‘deregulation measures to reduce the overall burden on business’ and attract business after Brexit.
Confirming the plan, Downing Street said the government was exploring how non-executive directors were paid, not how much – including removing “unnecessary restrictions on non-executive director share payments”.
But Labor accused the government of using “two sets of rules” on wages – one for high earners in the city and another for workers elsewhere.