Brexit has cost the UK a staggering £33bn in lost trade and investment, according to a new study that found that the economic damage is even worse than previously feared.
Research by the Centre for European Reform (CER), shared with The Independent, shows that Britain’s economy is 5.5 per cent smaller than it would have been if the country had remained inside the EU.
The UK’s goods trade is 7 per cent lower and investment is 11 per cent lower than it would have been had the Remain campaign won the 2016 Brexit referendum, according to the think tank’s analysis.
“Brexit has clearly had a significant impact on the economy,” said John Springford, deputy director of the CER. “There has been a sizeable hit on trade and investment.”
Mr Springford, author of the study, added: “There is a gap between the things politicians want to say about Brexit and what the data tells us. I think it’s become impossible to argue that Brexit has not hurt the UK economy.”
The CER modelled the performance of a “doppelganger” UK – if the nation had remained inside the EU – using data from other advanced economies similar to Britain prior to Brexit, including US, Germany, Norway and Australia.
A previous CER report found that by the end of 2021 the British economy was 5.2 per cent smaller than if the country had not left the EU, a loss of around £31bn.
The think tank has now found that by June 2022, the second quarter of the year, the UK’s GDP was 5.5 per cent smaller than if Brexit had not happened, a loss of £33bn.
The economic hit, first apparent in the years after the 2016 referendum, has become significantly bigger once the UK quit the single market and customs union at the start of 2021, the CER found.
“If you significantly raise trade barriers with your closest trade partner then it’s going to have big impact on your trade volume,” said Mr Springford.
He added: “There has been a very, very clear effect on investment in the UK ever since the 2016 vote – it has completely flatlined. That is not true of other similar economies. It is feeding into slow growth because it lowers productivity.”
Mr Springford said the impact of Covid had slightly complicated the picture when the think tank’s previous assessment was carried out earlier this year.
But he said it was now clear that the difference between Britain’s sluggish performance compared to similar economies was down to Brexit rather than the pandemic. “I’m confident that Covid is not skewing the picture.”
Tory chancellor Jeremy Hunt has rejected grim forecasts of Brexit’s hit to the economy, and Labour leader Sir Keir Starmer has said he does not accept the idea that re-joining the EU single market would boost growth.
Mr Springford said political parties should be “straight” with the public on the economic impact of Brexit if they want to set out clear and realistic plans for economic growth.
“While a lot of the marginal seats that the Conservatives and Labour are fighting over are relatively pro-Brexit, there is this incentive to downplay or ignore the economic consequences,” he said.
Layla Moran, the Liberal Democrat spokesperson for international development, said the research showed that the government’s approach to trade with the EU “is doing serious damage to our economy”.
She added: “Their decision to pile endless reels of red tape on British business was based on ideology, not pragmatism. It is small businesses, fishermen and farmers paying the price for this botched Conservative trade deal.”
Naomi Smith, chief executive of the Best for Britain campaign group, said it was “no surprise that the damage caused to the economy and personal finances since leaving the EU far exceeds projections made earlier in the year”.
She added: “With the economic reality laid bare, most people now realise Brexiters sold them a pup. If Sunak wants to turn the economy around before the next election, he should stop pandering to a minority of xenophobes, and start reducing barriers with our largest trading partner.”
The Office for Budgetary Responsibility has estimated that Brexit will reduce GDP by 4 per cent over 15 years from 2016 – swiping around £100bn from the economy.
Mr Springford it was too early to tell the long-term damage. “It could be that most of the economic costs might already have come through,” the economist added. “But it is also possible that the long-run costs of Brexit might be larger than the OBR estimate.”
It follows a damning new report that found Brexit has “added fuel to the fire” of the crises facing the NHS and the social care system. The Nuffield Trust said shutting off the “relief valve” of EU migration has intensified workforce shortages.
Pressures on the supply of medicines and medical devices have also steadily increased since Brexit, the health institute’s report found. Medicine shortages have been “especially prolonged” in the UK – likely because of trade barriers and currency depreciation linked to Brexit, the study concluded.
