Brexit is an economic disaster. This is not an argument up for debate. Statistics show that Brexit is already costing the UK billions – in GDP decline, in investment decline, in tax revenue decline – and that is not all.
“The UK could have had tens of thousands more police officers and nurses if Brexit had not happened. This isn’t a forecast, but an estimate of what Brexit has already cost us,” says the Centre for European Reform. Brexit is not hurting Europe as much as it is the UK, but the damage is severe. The cost of Brexit to the British economy is running at £40 billion (€45.4 billion) a year. A damaging no-deal scenario could see Britain crashing out of the European Union without a deal, which could trigger a deep and damaging recession with worse consequences for the UK economy than the 2008 financial crisis, the Bank of England has warned.
A no-deal Brexit would send the British economy into a tailspin, the bank says. GDP could fall by as much as eight percent next year, exceeding the depth of the recession that followed the 2008-2009 financial crisis.
The central bank says that, since the vote on 23 June 2016, the economy had lost about two percent of Gross Domestic Product. And the UK economy will continue to slow.
Brexit will also cost each British household £2,200 (€2.500) by 2020, according to a report by the OECD. By 2030, the OECD says, GDP will have been reduced by an additional five percent or more, with the cost of Brexit equivalent to £3,200 (€3,600) per household (in today’s prices). This jibes with the UK Treasury’s prediction that the economy would be six percent smaller by 2030.
Foreign investment in the UK is also forecast to decline sharply off, according to a Centre for Economic Performance-London School of Economics study. With Brexit, the UK will see a 22 percent fall in foreign direct investment over the next decade. About half of the FDI into the UK has come from the EU; this will obviously sharply decline after Brexit.
With Brexit, the UK will face tariffs in exporting to Europe. The annual direct cost of new tariffs and non-tariff barriers will be around £27 billion (€30.6 billion) for UK firms (equivalent to 1.5 per cent GVA) according to the consultancy Oliver Wyman.
As if all this weren’t enough, the Chancellor of the Exchequer Philip Hammond admitted on 28 November 2018, that the UK will be worse off “in pure economic terms” under all possible Brexit outcomes.
Costs to the EU
A no deal scenario would have immediate, but much less serious, consequences for the EU, with total costs at about €40 billion per year, according to German think tank Bertelsmann Stiftung. Germany would lose €10 billion, France, €8 billion, and Italy €4 billion – the remaining losses would be unevenly divided among the other 25 Member States.
On average, EU member states do about eight percent of their trade with Britain, compared with Britain’s 44 percent with the EU, according to Foreign Policy economists.
They can also relatively easily replace British suppliers with those from other Member States. However, some EU member states would suffer more than others.
“The regions affected the most are typically those that have strong industry, for example the automotive industry in countries like Germany, and parts of Spain and Italy. Also, financial services and IT services trade with the UK would be affected. And generally, we find that highly productive regions (like some Scandinavian hubs) would lose out the most”, the economist Dominic Ponattu of Bertelsmann Stiftung says.
New tariffs will cost EU businesses around £31 billion (€35.2 billion) for EU-28 firms (or equivalent to 0.4 percent of GVA), according to the Oliver Wyman study.
Economic arguments for Brexit are simply fake news
Consider that Brexit scraped through the 23 June 2016 Referendum vote on a 51.9 per cent majority, on the basis that the UK economy would prosper on its own.
The “Leave” faction had two arguments, both of them economic ones. Yet one was, what some may call, racist nonsense, and the other was just plain nonsense.
Academic research has confirmed the fact that fear of immigration was the main driver behind the Brexit vote. So when Brexit leader Boris Johnson, currently one of the top candidates to replace Theresa May as prime minister, claims that Brexit means the UK taking control of its destiny, he’s full of hot air.
What’s more, independent research shows that immigration is good for the UK economy – it boosts productivity. So anti-immigration sentiment in the UK has little basis in fact – this may not, of course, be true in other countries in Europe, but it is crystal clear for the UK.
The second argument for Brexit runs as follows: “We pay the EU £350 million per week. Let’s give it to the National Health Service instead.”
In fact, the Brexiteers have made all this up. The actual direct contribution to the EU by the UK is about £171,000 (€194,000) per week, according to statistician Anthony B. Masters. Ironically, Brexit has already cost the UK Treasury more than the £350 million per week that was supposed to go to the NHS, an independent study shows. Instead, the health service is seeing a budget squeeze.
But this is only the direct contribution by the UK. It does not take into consideration all of the EU programmes that fund startups, farming, infrastructure projects etc.
The only valid arguments for Brexit are those that discuss UK law and policy-making. Anglo-Saxon common-law jurisprudence doesn’t mix well with the Continental legal systems, all derived from the Napoleonic Code. The two systems come into serious conflict at the European Court of Justice, and British lawyers have been unhappy about the outcomes for a long time.
Similarly, there are aspects of economic and political policy – like the euro – that the UK governing class really doesn’t care to swallow.
These are matters, however, that can be resolved over time from a position within the EU. It isn’t necessary to create an economic disaster, one that in no way benefits any of the partners.