How will Brexit affect the future growth of the UK and EU economies?

0

A strong majority of panelists agree that the UK economy is likely to be at least several percentage points smaller in 2030 than it would have been otherwise. Weighted by each expert’s confidence in their answer, 86% of panelists in both groups agreed or strongly agreed with the statement, while 2% disagreed.

Experts’ views are more nuanced in the brief comments they are able to include when participating in the survey. Among those who strongly agree, Thierry Mayer of Sciences-Po notes: “This is one of the topics on which quantified evidence has accumulated in recent years, pointing to significant welfare losses “. Richard Portes of the London Business School says: “There are many studies, both from the official sector (eg the Office for Budget Responsibility) and academia (eg the Center for Economic Performance at the London School of Economics, LSE ). The consensus range is 4% to 6%.

Several panelists discuss the channels through which a negative impact is likely to occur. John Van Reenen of the London School of Economics and MIT says: “All serious analysis of Brexit shows a blow to the UK due to higher trade costs with its nearest neighbour. Peter Neary of Oxford explains: “Leaving the single market and customs unions imposes non-tariff trade barriers which will have a negative impact on trade volumes”.

Daniel Sturm of the London School of Economics comments: “There are many channels, but more border friction, less trade, and therefore less growth, is the most direct. Christopher Pissarides, also from the London School of Economics, notes: “Due to trade barriers and less research collaboration and commercial agreements with third parties. Christian Leuz of Chicago Booth adds: “For the UK, several channels are at play: trade, migration and human capital, and foreign direct investment.

Some panelists point to effects that have already happened. Judith Chevalier of Yale mentions: “The effects on investment and productivity have already been measurable. Oxford’s John Vickers agrees: “Substantial negative effects on investment and productivity already since the referendum”. And Stanford’s Nicholas Bloom says: “Brexit has reduced trade in services and migration to the UK. Both were stimulating growth and now both have been reduced.

A number of panelists provided links to analyzes of the effects of Brexit, including official reports from the Bank of England, the UK government and the Office for Budget Responsibility, as well as independent research from some of the panelists themselves—Nicholas Bloom and colleagues on the impact of Brexit on UK businesses; Peter Neary and colleagues on trade elasticities and geographic distance in the context of Brexit; and John Van Reenen and colleagues on the costs of Brexit in relation to COVID-19, and the implications for UK trade and living standards.

Among the panelists who said they were uncertain, several mentioned the role of future UK policy choices in determining the overall growth outcome. For example, Columbia’s Jose Scheinkman observes: “Although the impact is very likely to be negative, the magnitude is still very uncertain and will depend on future policy choices in the UK.”

Jordi Galí of the Barcelona Graduate School of Economics adds: “It will depend on the quality (in the sense of growth-oriented policies) that it will undertake from now on”. Aaron Edlin of the University of California at Berkeley says, “We don’t yet know what trade agreements will replace it. And Jan Pieter Krahnen of Goethe University Frankfurt explains: “It all depends on the extent to which the UK will pursue a beggar-thy-neighbour policy, essentially free-riding or EU arbitration.”

MIT’s Daron Acemoglu, who agrees with the statement, is pessimistic about the likely policy choices: “That’s my median expectation. Not because of the direct effect of a drop in trade, but because of the worst policies that will result from the politics of Brexit. But Stanford’s Robert Hall, who says he’s uncertain, is one of many panelists who doubt how far we can go: “It’s an incredibly complicated question with forces going into the both directions. The claim to expertise would be misplaced.

Share.

Comments are closed.