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The UK has taken a hit after Brexit, says the Bank of England rate setter

Since the exit of the Brexit referendum in 2016, the UK has suffered tremendous business investment losses, roughly £29 billion, or £1,000 per household, as per a senior official at the Bank of England.

According to Jonathan Haskel, an external member of the Bank’s nine-strong monetary policy committee that sets UK interest rates, private sector investment “stopped in its tracks” in the years after the decision to leave the EU.

According to him, the UK economy has lagged behind other major industrialized economies over the last six years, and the gap is widening, leaving a permanent scar.

As per the study conducted by Haskel and his team, tremendous harm was done when the former prime minister Boris Johnson left the EU single market and customs union after Brexit.

In a secret cross-party summit, influential leavers and stayers debated the current economic situation and how to improve it, including Michael Gove and key figures in Keir Starmer’s shadow cabinet.

Had the UK formally not opted for Brexit in 2019, compared to its current trade level, the GDP, or gross national product, was predicted to have increased by 3.2% growth in 2026, as per the Bank of England.

An independent economic forecaster of the government, the Office for Budget Responsibility, stated that the GDP is 4% lower compared to what it would have been had it remained in the EU.

Haskel, instead of using trade to reach the same conclusion, used business investments as a measure of the long-run loss of GDP.

The difference between current business investment levels and the trajectory before 2016 would equal 2.8% of GDP at the end of the projected period in 2026, “which is very close to the 3.2% number we found using the totally different methodology based on goods trade volumes”, Haskel stated.

In an interview with the Overshoot, a web newsletter, he said, “Imagine that business investment hadn’t basically flattened out after the 2016 referendum and instead rose as real investment did in more or less every other country.”

“What you could do is you could ask the computer to sort of simulate what would’ve happened to the capital stock, had investment carried on growing at the pre-referendum rate, and then figure out what the gap is between that simulated number and the actual number, which is a consequence of flat investment.”

“If you do all of that you find that the current productivity penalty is about 1.3% of GDP. That 1.3% of GDP is about £29 billion, or roughly £1,000 per household,” he stated.

“At the end of the forecast period, the penalty goes up to something like 2.8% of GDP.”

- Published By Team Timeswire

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