RPT-GRAPHIC-Three years later, Britain is still waiting for the Brexit dividend

(Repeats January 30 article without changes)


The UK lags behind its competitors in growth, investment and trade


Many economists say Brexit contributes to underperformance


Polls show that Britons increasingly regret leaving the EU


Pro-Brexit economist Lyons: UK’s problems have distant roots

By Andy Bruce

LONDON, Jan 30 (Reuters) – Three years after its exit from the European Union, Britain has yet to benefit from the promised Brexit dividend for its economy as it lags behind its peers on multiple fronts, including trade and investment .

Britain exited the EU on 31 January 2020, although it remained in the bloc’s single market and customs union for another 11 months.

That day, then Prime Minister Boris Johnson said the country could finally realize its potential and that he hoped it would grow in confidence with each passing month.

So far the opposite has been the case, with a number of indicators showing underperforming compared to other economies.

Opinion polls show that more and more Britons regret leaving the EU than do not. A poll released on Monday by news website UnHerd showed this was now the case in all but three of the 632 parliamentary constituencies surveyed.

The government, led by Prime Minister Rishi Sunak, a Brexit supporter, says Britain is thriving on newfound freedoms.

Last week, Finance Minister Jeremy Hunt took issue with talks of decline and said Brexit offers a brighter future with room for measures that will attract investment in areas such as the green economy and technology.

Many economists say leaving the EU isn’t the only cause of Britain’s woes – the country has been hit hard by the coronavirus pandemic – but it’s a factor that may help explain the recent underperformance.

“It was more than a slow fire. It was a major undercut in economic performance,” said John Springford, deputy director of the think tank Center for European Reform.

“If you impose trade, investment and migration barriers with your main trading partner (EU), then you will have a big hit on trade volumes, investment and GDP,” he said, pointing to a slew of dismal economic data.

Britain was the only advanced economy in the Group of Seven to regain its pre-pandemic size in late 2019 in late September last year, the most recent period covered by the data.

Springford estimated that Brexit has reduced Britain’s economic output – compared to what it would have been without leaving the EU – by about 5.5% in mid-2022, based on a “doppelganger” model in which a algorithm selects countries whose economic performance matched long before -Brexit Great Britain.

Government forecasting organisation, the Office for Budget Responsibility and the Bank of England also believe there is a long-lasting net cost to leaving the EU.

Some economists disagree with the consensus.

Brexit-supporting economist Gerard Lyons, a consultant to online wealth management platform NetWealth and who advised Boris Johnson during his years as mayor of London, said it was wrong to blame Britain’s woes on Brexit.

“Our problems go back to before Brexit,” Lyons said, pointing to chronically low investment rates in Britain. “Achieving the benefits of Brexit largely depends on realizing… a plan for growth: how you can leverage yourself after Brexit.”

He criticized the doppelganger method of analysis on the grounds that some smaller countries selected by the models were inappropriate comparators for a large economy such as Britain.


Trade and investment data point to other Brexit-related problems.

Exports, especially of goods, have disappointed over the past three years, despite high hopes for a rebalancing of the “Global Britain” economy after Brexit.

Total exports, including services, have grown less than those of any other G7 country since late 2019.

Boris Glass, senior economist at ratings agency S&P Global, said rising red tape in UK-EU trade had hurt the competitiveness of smaller UK producers in particular, as they have fewer resources to deal with it.

“It’s worth noting that the UK has more small exporters than, say, France or Germany. So they’re at a disadvantage in that respect,” Glass said. “If you are an exporter with 20 employees, the burden of filling out these forms is very expensive. Some of them cannot compete at all.”

Business investment has also grown less since the June 2016 Brexit referendum than in the United States, France or Germany, according to a Reuters analysis of data from the Organization for Economic Co-operation and Development.

Some pro-Brexit economists say those statistics ignore the fact that British business investment was unusually strong in the years leading up to mid-2016 and was set to slow. But evidence from business surveys overwhelmingly points to Brexit as a factor behind investment weakness in recent years.

“It’s concerning that there doesn’t appear to be any kind of recovery in investment. And I think, in order for us to have a lasting recovery from the Brexit shock, we need to see that increase,” Springford said.

Britain still boasts higher employment rates and lower unemployment than most EU countries, but there are some signs that Brexit may have impacted the labor market as well.

Business groups want the government to ease its post-Brexit immigration rules as companies are struggling to find workers, something the BoE fears is fueling inflationary pressures.

And unlike most of its G7 peers, Britain’s employment rate has yet to return to its pre-pandemic level.

(Reporting by Andy Bruce Editing by William Schomberg and Mark Heinrich)

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