Brexit is making us poorer – and Rishi Sunak agrees

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So that’s how it goes. Six years after the referendum campaign, during a parliamentary committee hearing on a sleepwalking afternoon at the end of March, the economic downsides of Brexit were finally recognised. On March 28, Rishi Sunak – recast last week as Chancellor content to push 1.3 million people into poverty, after a two-year honeymoon as the beloved provider of pandemic support from the country – confessed to a small room of barely heeding MPs that Brexit could indeed be to blame for the lasting collapse in the UK’s ability to trade with the rest of the world.

The question came two hours after Sunak’s uneventful appearance before deputies. Mel Stride, the chairman of the Treasury Committee – peering over his glasses and sporting a pair of sideburns reminiscent of the early 1970s when Britain was last outside the EU and impoverished – made remarking to Sunak that “there have been, like the OBR [Office for Budget Responsibility] expected, a drop in the level of our trade.

Trade in many countries has been hit by the pandemic, but other major economies have rebounded, Stride said. Britain, however, did not. UK trade is down 12% since 2019, more than double the second lowest G7 economy. “Doesn’t that tell you,” Stride asked, “that the main distinction between us and them is that we got through Brexit and they didn’t?”

“It may well be,” Sunak said, offering a frankly refreshing response before correcting himself and adding that it was “too early to be definitive on this” (he voted Leave during of the 2016 referendum). What else could be responsible for Britain’s ongoing collapse, Stride asked, as Sunak continued to obscure: “Look, I don’t have all the numbers with me… If you look at the UK-EU and UK-rest of the world imports and exports, there’s a range of different things going forward [sic]and they’re not all self-consistent, so we’re still trying to figure out what all the impacts are.

The OBR is tasked with sifting through these impacts, and its current findings are clear: across the G7, trade is particularly depressed in the UK (see chart below), and is expected to be impacted at long-term 4% on GDP. of Brexit – twice the level of economic scarring that the OBR expects to have been caused by Covid.

“It was always inevitable that there would be a change in the intensity of our trade,” Sunak continued, sounding both mildly annoyed and oddly unfazed as he tried to focus on the decline in British trade “with Europe”. “It’s normal,” Sunak said, “and it’s not surprising when you change a trade relationship with the EU.” A change in that relationship “obviously will have an impact,” Sunak conceded, “and I’m sure that’s a big part of why this [fall in trade] happened.”

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But the problem for Britain – and for the narrative long advanced by fervent Brexiteers – is that its trade has plummeted. with the world. None of the UK’s trade deals have been on par with the massive disruption to UK trade with Europe caused by Brexit. Sunak sought to trumpet these chords. Britain, he said, was not becoming a more closed economy – “in fact the job the Trade Secretary does makes us much more open to countries around the world for trade”.

Isn’t that just an aspiration rather than a reality, Stride asked. “Benefits from new trade relationships take time,” Sunak said, seeking appeasement. “They don’t happen overnight.”

Throughout his testimony, Sunak had relied on evidence offered by experts to justify his Spring Statement. But on Brexit, the OBR’s words were strangely absent, perhaps because they clearly contradict Sunak’s baseless optimism: “exports and imports will be about 15% lower in the long term than if the UK had remained in the EU”, the OBR wrote in 2021. “New trade agreements with non-EU countries will not have a material impact” because “most agreements reproduce largely or ‘renew’ the agreements the UK already had as a member of the EU”.

Britain’s recent trade deal with New Zealand – a country the size of Wales, just 11,500 miles away – will boost UK GDP in 2035 by ‘between 0.023 and 0.034%’ , according to the OBR. If those decimals seem insignificant, there’s still Britain’s trade deal with Japan, which is set to ‘raise UK GDP by 0.07% over the next 15 years’ – such a small impact that the OBR describes it as equivalent to “not having a trade deal with Japan” at all.

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