The country’s departure from the EU has reduced the size of its economy, analysts say
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The UK has paid a high price for Brexit, which has spurred inflation and trimmed the size of its economy, Bloomberg reported on Monday, citing economists from Goldman Sachs.
The departure from the EU has reduced Britain’s real GDP by about 5% compared to the performance of its economic peers, according to Goldman’s chief European economist, Sven Jari Stehn.
Seven years on from the referendum campaign, Britain has ended up with an underperforming economy and soaring cost of living due to reduced international trade, weak business investment, and a reduction in migrants coming from the EU, the UK’s largest trade partner, the experts noted.
“The evidence points to a significant long-run output cost of Brexit,” Goldman Sachs’ economists wrote in a note. “The UK has significantly underperformed other advanced economies since the 2016 EU referendum.”
Previous estimates from other observers also pointed to a long-term negative impact of Brexit. The UK’s National Institute of Economic and Social Research (NIESR) estimated in November that Brexit had reduced the size of the economy by 2-3%, an impact that is expected to rise to 5-6% by 2035.
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According to estimates made last year by the UK’s Office for Budget Responsibility, the exit from the EU likely reduced economic output by 4%.
However, not all of the UK’s economic woes can be linked to the departure from the EU, according to the Goldman economists. Brexit headwinds come on top of the damage caused by the Covid-19 pandemic, the energy crisis triggered by the Ukraine conflict, and the high interest rates required to tame inflation, which is at historic highs in Britain.
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