A new report reveals the huge and lasting economic costs of Brexit

As a consistently reliable and well-regarded economic think tank, the National Institute for Economic and Social Research (NIESR) is a beacon in a dark night of misinformation, dodgy analysis and wishful thinking.

Its latest research on the costs of Brexit is therefore well worth reading and publicising, it certainly puts anything pushed out by the Tufton Street libertarians in the shade.

Niesr’s latest study starts with some welcome honesty, Brexit is not the only cause of the UK’s problems – it has just added to the woes of the credit crunch and numerous other issues. With a resultant slowing of growth (and productivity which the latest data shows is actually still getting worse) it has cost the UK sorely. British workers should be about 10% better off than we are.

But as NIESR makes clear, sorting out the influences – Covid, the war in Ukraine, Brexit – is not easy. But they have devised a model that works, and the results are sobering. If you factor in the decline in trade with the EU, the associated reduction in the UK’s terms of trade, the reduction in productivity and the permanent hit to the willingness of foreign and British business to invest in the UK, you get a pretty disturbing picture.

These calculations show that Brexit had already cost the UK 1% of GDP before it even left the EU. In the three years after the transition period, the cost has increased to 2-3%. That is only the beginning. These costs and problems do not go away, they are not one offs. NIESR calculates that by 2035 the cost will rise to 5-6% of GDP.

These figures are even worse than the Office for Budget Responsibility’s forecasts of 4%, which were made some time ago and in line with the work by researchers at the London School of Economics.

Remember this is all on top of the hit to the economy from the massive spike in inflation that has been caused by the war in Ukraine, and the damage done to the economy by the high interest rates required to bring down inflation, and by the huge economic damage done by Covid. Every other economy has had to deal with those two hammer blows – but the 5-6% of GDP lost because of Brexit is on top of all these other costs and is unique to the UK.

Remember, when the Chancellor tells you that further austerity is needed, benefits need to be cut again, there is no more money for schools or infrastructure or health, that it is not all down to Covid or Ukraine. It is all that and Brexit on top.

A cost of 5-6% of GDP is a lot of money. Britain only spends 2% of GDP on defence and only 10% or so on health. When you think to yourself, “I am already paying a lot in tax, and it is going up all the time – but where are the better services?” that is your answer.

The Chancellor won’t mention it, the PM will deny it, the cabinet will promise once again to do more with less; but the simple fact is they threw the money away so we could have blue passports.

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