What impact is Brexit having on the UK economy? – Briefings For Brexit

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In this major report on the impact of Brexit using the latest data, the three authors examine a wide range of economic indicators including, GDP, trade, investment, inflation and employment. Their conclusion is that there is no hard evidence that Brexit has had a negative impact on the UK economy.
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One might have hoped that, once the political decision of the electorate was made, that we would have moved on, accepted that we have left the EU and sought to make it work in the country’s best interests. While in political terms, it is certainly the case that Brexit has happened, the economic debate has not moved on sufficiently. This matters; since 2008 the UK economy has grown at a slow pace. If we continue to attribute our challenges to the wrong reason – by always blaming Brexit – then it is unlikely we will make the right policy decisions to move towards the economy of strong and sustainable growth, high productivity, and well-paid jobs.
Over recent months there has been a tsunami of media stories and other claims about Brexit having a negative impact on the UK economy. Publications such as The Financial times[1], Economist, Guardian[2], Sunday Times[3] and Observer[4] have continually promoted arguments or studies suggesting that Brexit is ‘not working’, implying that some return to the EU fold should be considered. Headlines attempt to link bad news on the economy to Brexit whenever possible. The Conservative MP Tobias Ellwood received much publicity for his call to rejoin the EU single market[5].
Negative claims about the impact of Brexit cover areas such as GDP, trade, investment, the labour market, inflation, the value of sterling, and the performance of individual industries including the food and fisheries industries and financial services.
Our contention in this report is that much of the evidence used by Brexit critics to show a negative Brexit impact is unsound. It relies on flawed methods and carefully selected dates for comparisons. It also often relies on counterfactual scenarios to claim that the recent performance of the UK economy could have or should have been better. Such counterfactuals are based on the experiences of other countries or other time periods and are necessarily selective and often inappropriate.
Some recent claims about negative effects of Brexit are also based on economic forecasts. We think it is wrong to place much weight on these. Predictions from the OECD or IMF have not been sufficiently accurate for us to rely on their current forecasts. As for the UK Treasury, with its embarrassingly poor 2016 short-term forecasts for Brexit, we may note that recent Chancellors of the Exchequer have prevented the Treasury from conducting further forecasts.
Our focus is firmly on the evidence of what has happened to output, employment, trade, sterling, and prices since the referendum in 2016 and particularly since the Trade and Cooperation Agreement (TCA) with the EU came into operation in January 2021. In our view, looking at the evidence from long time series of UK performance, and making more sensible and careful comparisons with other major economies, does not suggest that Brexit has had a discernable negative economic impact. Certainly, there is no sign of the catastrophic effects many observers were predicting prior to and immediately after the referendum of 2016.
It is too early, in our view, to definitively establish whether Brexit has been an economic success or not, and the effects of the pandemic and its aftermath complicate any analysis of recent economic performance. But given that it was widely thought that most of the costs of Brexit would be visible and up-front, and the benefits slower to come through, the economic picture painted by our analysis suggests reasons for cautious optimism about the long-term outlook. This is in sharp contrast to the mostly downbeat and often shrill media commentary of recent months.
Summary of claims of negative impacts of Brexit
A good summary of the recent negative claims about how Brexit is damaging the UK economy can be found in the Financial Times’ Big Read ‘The deafening silence over Brexit’s economic fallout’, published on June 19th 2022[6]. While the article admits that ‘some gloomy predictions have failed to materialise’, it nevertheless argues that ‘there is growing evidence that Brexit is causing…lasting damage to UK economic prospects’. This view has been echoed across much of the media and has influenced the ongoing debate about Brexit both in the UK and globally.
The claims presented by the FT and other observers cover a variety of areas:
GDP. It is argued that UK growth has been relatively slow since 2016, either in absolute terms or relative to some counterfactual path it would have taken had the UK stayed in the EU. Alternatively, reference is made to forecasts – the FT states that ‘Next year according to the OECD the UK will have the lowest growth rate in the G20 except for sanctioned Russia’ and ‘the OBR has seen no reason to change its prediction, first made in March 2020, that Brexit would ultimately reduce productivity and UK GDP by 4%. It says ‘little over half that damage has yet to occur’.
Investment. It is argued UK investment has fallen below its trend path and underperformed relative to other economies since 2016 – according to the FT ‘UK business investment fails to rebound…it…flatlined since the referendum, ending a period of growth since 2010 and falling well short of the performance in other G7 countries.’
Trade. UK trade performance is said to have been weak since the UK left the EU single market and customs union at the start of 2021, either in absolute terms or relative to other economies – the FT claims ‘Trading performance with Europe since the TCA has become increasingly ugly especially for small companies trading with Europe.’
Exchange rate and prices. Brexit is argued to have led to a sharp fall in the value of sterling and pushed up UK inflation relative to the rest of the EU, both immediately after the 2016 referendum and since 2021.
Labour markets. The UK labour supply is said to have been damaged by Brexit, with a huge outflow of EU workers.
The City and Financial services. It has repeatedly been claimed that Brexit has damaged the UK’s important financial services industries, by causing an exodus of firms and jobs.
Northern Ireland. Brexit opponents and EU sources have claimed that the economy in Northern Ireland has outperformed the rest of the UK – from the FT again ‘Northern Ireland (the only part of the UK to remain in the EU’s single market for goods), is the best performing part of the UK apart from London.’
In what follows, we tackle each of these areas in turn and examine the Brexit-related claims made by critics of Brexit in each area.
 
Overview of growth performance
The most important measure of the economic impact of Brexit is what happens to GDP. Any change in trade, investment, employment, or other aspects of the economy is likely to affect aggregate GDP. There could in principle be offsetting influences with a positive impact on one variable and a negative impact on another, but in practice the claims of commentators tend to be that Brexit has a greater or lesser negative impact on several key aspects of the economy.
There have been multiple claims that GDP has been or will be reduced by Brexit. David Smith of the Sunday Times is perhaps the most enthusiastic and (over-) confident. In his column of July 3rd[7] he wrote ‘the evidence is clear. Brexit has given the UK lower growth, higher prices (before the inflation surge) and a significantly weaker pound. Anyone who suggests otherwise takes you for a fool’.
Picture1
Source: OECD, BEA
Using OECD quarterly data, Smith correctly stated that growth in UK GDP since 2016 Q2 had been above Germany and Italy and only modestly behind France (see Chart 1). One might have thought these growth figures were enough to discredit the various predictions of serious economic damage from Brexit, but not at all. Smith then, like others, constructed a counterfactual. His view is that the UK should have continued to outperform these countries by a similar amount to the way it did between 1992 Q2 and 2016 Q2 when the UK economy grew nearly twice as fast as Germany, almost three times as rapidly as Italy, and much faster than France. Chart 2[8] shows the growth of these economies since the UK first joined the EEC, as it then was, in 1973. Smith’s counterfactual period is shown between the two vertical lines.
Picture2
Source: OECD. UK data for 2020-2021 adjusted using current price GDP data as recommended by the UK ONS
 
Smith’s period starts in a UK recession, thus exaggerating UK growth over the period. After 1992 the UK recovered from a deep recession, aided initially by a real depreciation of sterling and later by a lengthy credit boom and fiscal expansion from 1999. If we exclude this period of recovery in the 1990s, then during the current century up to 2016 the UK grew at similar rates to France and Germany but faster than Italy.
The comparison with Germany is clearer in Chart 3. This shows that GDP growth in the UK lagged behind that in Germany in the early decades of membership of the EEC/EU but began a sustained recovery after 1992. In addition to the factors cited above was the costly reunification of Germany from 1990 and a period of slow growth in Germany due to the eurozone financial crisis in 2012-2013. By 2003 the UK had overtaken German growth and has remained a little ahead ever since. The faster growth mainly occurred in the 1990s. From 2003 until 2016 there is little difference between UK and German growth rates and hence no need to regard the UK’s favourable relative performance since 2016 as unrepresentative in the way that Smith suggests.
A comparison of UK growth in GDP with France also shows faster UK growth during Smith’s counterfactual period of 1992-2016. The UK growth advantage lasted longer than versus Germany, until 2016, in part due to very slow French growth in 2011-2015 around the time of the eurozone financial crisis that followed. Since 2016, French and UK growth has been similar, but the disappearance of the UK’s growth advantage of 2011-2016 is not necessarily a Brexit effect as Smith blithely assumes – especially given the weakness of French growth in 2011-2015 and the fact that the UK’s cumulative relative growth lagged that of France until 2014.
Smith’s claim of faster UK growth before the 2016 referendum thus depends greatly on performance during the 1990s, and on an assumption that faster UK growth in a particular period of the past can be extrapolated into the future.
Picture3
Source: OECD
A more appropriate counterfactual period, in our view, might be the decade immediately before the UK Brexit referendum when UK economic growth was similar to that in Germany but faster than France. Even in this period, relative UK performance was boosted by the negative impact in Germany and France of the eurozone financial crisis of 2012-2013. But if we nevertheless take it as a reference period, there is no evidence that UK growth has underperformed since either the Brexit referendum or the period outside the EU’s single market and customs union since January 2021.
Smith also claimed that growth in UK per capita GDP since the spring of 2016 was slower than in France or Italy, albeit faster than in Germany. Smith does not mention that UK per capita growth was also faster than in Canada, Spain, and Japan (but not the US which has recovered rapidly since the pandemic with huge fiscal boosts). Once again, economic performance during this period is heavily influenced by the pandemic especially in 2020 but also during the recovery phase in 2021.
Our view is that the UK economy has performed largely in line with its main comparator countries since the Brexit referendum. Over the entire post-WW2 period per capita GDP in the UK has grown at about the same rate as the US or (since 1973) as the G7, but there are cyclical differences depending mainly on variations in fiscal and monetary policy[9]. The US’s major fiscal expansion under both Trump and Biden has led to rapid growth but as inflation accelerates higher interest rates are likely to slow US growth. It will be several years before we can clearly see any sustained impact of Brexit on the UK performance relative to that of the US.
Synthetic Counterfactual or Doppelgänger Analyses
Smith is also one of a large group of media commentators to support the latest example of the use of the synthetic counterfactual or ‘doppelgänger’ approach, by the Centre for European Reform in 2022[10]. Due to the widespread publicity received by this report and its frequent citation by those in favour of rejoining the single market and custom union, we describe it in detail[11].
The CER report’s author, John Springford, described the method as ‘an algorithm [which] compares data on the UK’s economic performance with that of 22 other advanced economies. It selects a subset of those countries and allocates each a weighting, to create a basket of countries that minimises the difference between their data and that of the UK. The algorithm matches the growth rate of real GDP, GFCF [Gross fixed capital formation], services and goods trade, from Q1 2009, as well as the inflation rate, industrial production as a share of GDP, average years of schooling and other variables. We can then compare the performance of this doppelgänger against that of the UK.’
The doppelgänger group for GDP is made up of the United States (31 per cent), Germany (15 per cent), New Zealand (14 per cent), Norway (8 per cent) and Australia (5 per cent). The remaining countries make up less than 5 per cent of the doppelgänger each. These countries were selected using quarterly data from the pre-Brexit period 2009 Q1 to 2016 Q2. The UK’s performance is then compared with that of the doppelgänger group from 2016 Q3 to 2021 Q4. For trade and investment other groups and periods are used.
The result is shown in the CER’s chart 1 (reproduced here as Chart 4) comparing the UK with the CER’s doppelgänger groups. For GDP the UK is 2.9% behind the comparators by the end of 2019 and 5.2% by the end of 2021. The method also generates large negative impacts for Brexit on investment and trade in goods but not trade in services.
This methodology has many problems which mean that its results cannot be taken as representing a reliable counterfactual:
The comparator countries may be inappropriate. Doppelgänger studies often use comparator countries which are economically very different from the UK. It is not obvious why economies like New Zealand, Japan and Hungary with very different industrial and trade patterns should be good proxies for the behaviour of the UK economy in a non-Brexit world.
The comparator countries keep changing. The current set of comparator countries used by CER is not the same as in previous CER doppelgänger exercises. For instance, in its early calculations starting in June 2018[12] the comparator countries were mainly US, Germany and Luxemburg but also Iceland and Greece. The June 2022 CER report also uses different sets of comparators for GDP, investment, and trade. Using different comparators for individual variables is rather unsatisfactory.
The latest report says that, in the past, comparator countries were dropped because some countries were subject to economic shocks unrelated to Brexit. It cites the key example of the US where major fiscal expansions under Trump and Biden accelerated economic growth. This was a point made in a critique[13] of the earlier CER estimates. Although the growth of the UK economy is correlated with the US over the long run, there is no guaranteed correlation over the short run. Using the US as a benchmark for post-2016 growth was misleading due to the fiscal expansion generated by the Trump administration. The IMF fiscal monitor shows that the US fiscal stance loosened by 3% between 2015 and 2019 while in the UK there was a tightening of 1%, a large enough difference to significantly affect economic growth. This point about the US is acknowledged in the current CER report but has not stopped it using the US as a comparator for GDP and does not appear to be factored into the calculations.
Chart 4 – CER doppelgänger chart (reproduction)
Picture4
Divergence can occur for many reasons, not only Brexit. The fact that different countries are subject to different shocks at different times, and are at different points in the economic cycle, is a general weakness in the doppelgänger approach. Just because economic growth in two countries has been closely correlated in the past does not mean that they will continue to be correlated in future. This depends on a range of policy choices and other circumstances. The CER interpret any divergence between the UK and the comparators after 2016 or 2020 as being due to Brexit but, as we will show, this need not be the case.
Perhaps the most serious flaw in the CER analysis is the choice of period for setting a benchmark. As discussed above, the period 2009-2016 was one of recovery in the UK from the deep banking crisis recession of 2008/9. Attempting to match other countries with the UK over this period will naturally select faster growing economies. Most eurozone economies except Germany are thus excluded. If, as we argue, the period of faster UK growth was inherently temporary, the benchmark countries will cease to be relevant once the cycle turns.  We cannot say when the cycle would have turned, but to ascribe any slower growth after 2016 Q2 to Brexit is heroic to say the say the least.
Picture5
Source: OECD. US dollars, volume estimates, fixed PPPs, OECD reference year, seasonally adjusted
This point is illustrated in Chart 5 which shows growth in real GDP for the UK relative to the rest of the G7 group of major economies from 1990. The CER’s comparator period (2009-16) happens to coincide largely with a cyclical upturn in the UK economy relative to the rest of the G7 over 2011-16.  It is implausible, Brexit or no Brexit, that a relative upswing would have continued for long after 2016.  If it had, and the UK had continued its trend outperformance relative to the rest of the G7, the UK would have reached an unprecedented level above the G7 average by the end of 2019.
This is very unlikely and indeed what we saw was what was to be expected: a cyclical slowdown between 2016 and 2019 which kept the UK within the broad GDP range established since 2000. In fact, the downturn in the UK share of GDP in the G7 is wholly due to the accelerated growth in the US. The UK share of the G7 excluding the US does not fall after the Brexit referendum in 2016. It continues to rise and by 2022 Q2 is at its highest ever level and exactly on the trend of the rising UK share since 1990. There is thus no obvious sign of any negative impact of Brexit.
So, the CER’s conclusion that Brexit caused a 2.9% loss of GDP between 2016 and 2020 is based on an assumption that without Brexit the UK would have continued to remain at its 2016 peak relative to the G6, with no cyclical downturn. To assume that a relative slowdown is largely, or even wholly, due to a single factor — Brexit — would require clear evidence to be presented.  The CER present none other than the coincidence in timing. The CER also assume that, once lockdowns ceased and economic activity began to recover, there would be no further distortion in measurement and hence any further differences will be due to Brexit alone. This can only be regarded as a brave assumption given what we know about ongoing disruption in all economies and backlogs in public services.
Similar criticisms can be made about other doppelgänger-based studies. Dhingra et al. (2022) compare UK GDP with that of the rest of the G7 from 2013 Q1 to 2019 Q3 and conclude that more rapid UK growth during this short pre-referendum period contrasts with slower relative growth in the three years after the referendum. It is a good example of inappropriate date selection leading to a negative conclusion for Brexit. Chart 6 shows that over a much longer period the UK economy grew at much the same the same rate as the rest of the G7 albeit with short periods of divergence.
Picture6
Source: OECD. US dollars, volume estimates, fixed PPPs, OECD reference year, seasonally adjusted. Note the data for 2020 and 2021 is adjusted for differences in measurement of public-sector output as noted earlier.
Dhingra et al. try to link UK growth performance after the referendum to Brexit effects using the Bank of England’s Decision Maker Panel (DMP), claiming it shows firms cited Brexit as a major source of uncertainty especially during 2017 and 2018. The future of Brexit was certainly in question during these years but whether one ascribes this to Brexit itself or to opposition attempts in parliament to water-down or abandon Brexit after the 2017 general election is a matter of judgement. Whatever the state of business confidence, any negative impact on national output is hard to discern as the above analysis shows.
The impact of the pandemic and measurement issues
Comparisons of very recent trends in GDP growth in the UK and elsewhere are greatly complicated by the Covid pandemic which massively disrupted all economies from the beginning of 2020, a period which represents nearly half of the comparator timeline used by CER and others.  Countries used different levels and timings of lockdown with varying impacts on their economies and they also used different methods to measure GDP during these unusual circumstances. The measurement of GDP differences before the pandemic is controversial enough, but the CER’s attempt to extend its method into the pandemic and its immediate aftermath is hopelessly flawed.
Not only are the figures for all the comparator economies distorted, but there are also specific measurement distortions between the UK and many others.  The differences in the impact of Covid on GDP between the UK and other advanced economies have been analysed in detail by the ONS[14] in  a February 2021 report. The ONS make two significant points. Firstly, the UK has more of its economic activity in services which require personal contact. These include hotel and restaurant sectors, plus cultural and sports activities.
Secondly there is an important difference in the way output is measured in public sectors, including health and education. The ONS has fully applied international standards by using direct output indicators such as the number of operations conducted by the NHS or GP consultations and the number of children in school. Many of these indicators of output which work well during normal periods showed falls in output during the pandemic because normal medical procedures and teaching were disrupted, even though the staff were fully employed on covid-related treatments and on distance learning in schools and colleges. Other countries did not use this methodology and simply used expenditure data deflated for price changes, which showed a much lower loss of output due to covid.
International comparisons thus show a much larger loss of real output in 2020 for the UK, largely though not entirely recovering during 2021. This is principally a measurement effect not an accurate account of output during the pandemic – there is a much bigger gap in 2020 between current and constant price GDP changes than in other G7 economies, reflecting measurement differences.
These measurement differences matter a lot when cross-country comparisons are attempted. For example, if we use standard constant price data for UK and French GDP to measure output performance in 2020 and 2021, French growth looks about 2% higher than UK GDP from 2019 Q4 to 2021 Q4. But if we instead use current price series as the ONS suggest, the growth rates of output over this whole period are almost identical (Chart 7). Nor is this necessarily the final word: since recent data of GDP is subject to revision, currently on different timescales and reflecting treatment of the economies during Covid, these data may change further
Picture7
As a further check on the conclusions about the impact of Brexit, Chart 8 shows data for output in manufacturing industries which is less subject to revision and is also the part of output most sensitive to Brexit effects as it is highly tradable. A negative effect from Brexit-induced changes in access to EU markets (or the anticipation of such changes) should be evident in a weaker relative performance of the UK manufacturing sector. However, the data show manufacturing output growing faster than major EU economies from 2016 to 2019. Following a somewhat shallower dip than in the EU economies in 2020 Q2, UK output then recovered faster than in France or Germany. By mid-2022 UK output was well above its 2016 level and ahead of all three major EU economies. Once again, there is no indication in the hard data that Brexit has damaged UK output.
Picture8
Source: OECD Oct 2022 https://data.oecd.org/industry/industrial-production.htm
 
Economic forecasts and the future of Brexit
Many of the claims about a negative impact of Brexit on GDP are based on forecasts rather than actual data. Some recent commentary has focused on IMF or OECD forecasts for the next two years, picking out 2023 as a potentially weak year for the UK relative to other advanced economies. The UK is of course likely to have weak years from time to time. But given the patchy forecasting record of these bodies and the major uncertainties around such forecasts at present (unrelated to Brexit), we would not be inclined to give such forecasts much weight.
What about longer-term forecasts? Dhingra and Sampson (2022)[15] state that ‘the consensus, shared by most researchers, policy institutions and businesses, is that Brexit will have a negative long-run effect on the UK economy by raising barriers to trade, migration and investment between the UK and EU’. But these studies have often featured unrealistic assumptions. The study by Campos et al (2014) features a completely inappropriate reliance on New Zealand as a benchmark economy. Another study, Dhingra et al. (2017)[16] only finds a small effect from trade barriers and instead relies on estimates of losses related to the UK remaining aloof from future EU regulatory reforms – a matter of future UK policy, not Brexit per se, and dependent on what regulatory reforms are adopted in the UK.
In addition, we may refer to the deeply flawed UK Treasury studies[17]  and similar studies by the OECD and IMF. The Treasury work in particular has been subject to severe criticism for its methodological failures and unrealistic assumptions for example in Gudgin et al. (2017)[18], Coutts, Gudgin, and Buchanan (2018)[19] and most recently (in particularly damning terms) by Semken and Hay (2021)[20].
The most widely quoted long-term estimate for the impact of Brexit on UK GDP originates from the UK Office for Budget Responsibility (OBR) which posits a 4% hit. But this estimate is not what it seems. It is not the result of any forecasting or modelling work by the OBR itself but instead is just an average number for the effect of Brexit on UK productivity, estimated by the OBR from a range of other studies[21], including some of the badly flawed studies mentioned above and some which have implausibly high estimates of negative effects from Brexit. A particular problem with some of these long-term estimates is their reliance on a strong assumed relationship between trade intensity and productivity, an issue we will return to in Chapter 5.
Conclusions on GDP
The UK economy has performed reasonably well since the Brexit referendum compared to most major advanced economies. One of the most obvious conclusions is that the dire warnings made, especially by the Treasury immediately prior to the referendum, have not come to pass. To reach an opposite conclusion, analysts (some of whom are clearly opponents of Brexit) have tried to use counterfactual scenarios to demonstrate that in the absence of Brexit the UK economy would have grown even faster than it actually did. The key weakness of all these counterfactual scenarios is that they have used as benchmarks past periods in which the UK economy was recovering from recession. They thus cover cyclical recoveries which the analysts then assume would have lasted indefinitely (or at least up until the present day) in the absence of Brexit.
The later years of the post-referendum period also coincided with the most economically disruptive pandemic for almost a century. A particular difficulty is that the pandemic and its associated lockdowns lasted into 2021 as the UK finally departed from the EU’s single market and customs union under the Trade and Cooperation Agreement (TCA). Most western economies recorded strong recoveries during 2020 and into 2021 but it is difficult to distinguish covid and Brexit effects during this period except perhaps for temporary trade disruption in the UK at the start of 2021. It will thus be some time before it becomes possible to draw clear conclusions about the long-term impact of Brexit. Some attempts to jump the gun on this may be politically motivated and care and patience is needed to reach meaningful conclusions.
One of the most confident assertions in articles on the impact of Brexit is that UK investment is much lower since the referendum than it would have been in the absence of Brexit. Our view is that inadequate investment is a longstanding problem in the UK and the most recent years have experienced sluggish trends especially in business investment. It is not clear, however, whether this is due to Brexit, Covid, structural factors, the timing of investment cycles, or the political crisis triggered by the referendum.
UK investment has been on a rising trend for the last half century but fell well below the long-term trend during the pandemic, before recovering somewhat. Brexit critics argue that this recovery has been incomplete, especially with respect to the pre-2016 trend, but their arguments are overstated.
First, total UK investment has in fact recovered to around its long-term trend level. Brexit critics instead focus on the narrower concept of business investment, which excludes government investment and investment in dwellings (Chart 9).
Second, Brexit critics exaggerate the apparent weakness in business investment by using inappropriately short time periods. The upward trend during the post-2009 recovery is extrapolated beyond 2016 and actual investment post-2016 is then compared with the extrapolated trend to show that the actual level is well below this extrapolated trend. This is not a reasonable counterfactual position as investment was well above its long-term trend by 2016, in the process of recovering from a very weak period after the global financial crisis. A slowdown after this rapid catch-up period could thus be expected. Investment was badly affected by Covid but has been recovering since the first lockdown in Spring 2021. Taking this longer-term view, business investment in Q2 2022 was a relatively modest 6% below trend.
Picture9
Source: ONS
Note: GFCF-gross fixed capital formation, or total investment
Another factor exaggerating the recent apparent weakness of UK business investment is the collapse since 2016 of investment in extraction – mostly North Sea oil and gas. Since mid-2016, investment in this sector has slumped from £4bn per quarter (8% of business investment) to just £0.6bn (1.1% of business investment). This reflects a long-term decline in the industry and some government decisions and is not connected to Brexit. If extraction investment is excluded, UK business investment in Q2 2022 was almost the same as in Q2 2016, instead of being 6% lower as the headline number suggests and was close to its long-term trend (Chart 10).
Picture10
Source: ONS
Brexit critics have also compared UK investment trends unfavourably with investment trends in other advanced economies. As noted earlier, the CER ‘doppelgänger’ study attempted to do this by comparing UK total investment with a group comprising the US (48 per cent), New Zealand (15 per cent), Iceland and Denmark (9 per cent each) and Japan (8 per cent). The analysis by CER shows UK investment falling below that of the comparators in the 2017-19 period with little further deterioration during and after the pandemic, implying any Brexit effect pre-dated the UK exit from the EU customs union and single market.
Picture11
Source: ONS, Eurostat. EU-3=Germany, France, and Italy
One explanation for investment trends in 2017-2019 relates to political and economic uncertainties in this period in the aftermath of the Brexit referendum. But cyclical factors are probably more important. As noted above, UK investment was well above trend in 2016 and only in exceptional circumstances would it have continued to grow at an above-trend rate. Importantly, in this period investment in the big EU economies was below trend, from which a recovery was likely (Chart 11). So apparently negative comparisons with other economies may just be picking up the effect of unsynchronised investment cycles.
As noted earlier, we find the doppelgänger approach flawed and prefer to compare UK economic performance directly with other major advanced economies, especially the large EU economies. If we do this, then the UK investment performance since the end of 2019 does look sluggish compared to Germany and especially France. However, the difference in performance with Germany is not large and what we see here may just be a structural feature of the UK economy, i.e. that it tends to have delayed investment recoveries after downturns. If we look back to the aftermath of the recessions of the early 1990s and the recessions that followed the global financial crisis, we can see that the UK business investment recoveries in these earlier periods also lagged those of Germany and France (Chart 12).
Picture12
Source: OECD/ONS. Business investment for Germany and France estimated by excluding government investment and investment in dwellings from total investment.
At this point, another health warning is appropriate. A major complication in interpreting cross-country comparisons since 2019 is the impact of the covid pandemic. The negative impact of the pandemic in 2020 is very clear but the timing of this impact, both the initial investment slump and the subsequent recovery, will have varied across economies due to different Covid policies and we cannot be certain that the influence of these timing shifts has completely washed out of the data yet.
One further area Brexit critics have focused on is foreign direct investment (FD) into the UK. Much of the literature claiming negative effects from Brexit has argued that FDI into the UK would slump, with damaging effects on productivity and growth and some recent analyses[22] have claimed this slump has already occurred. But these analyses typically focus on measures of overall FDI which are heavily influenced by large mergers and acquisitions flows – financial transactions that are statistically noisy and cannot be expected to have large effects on UK productivity. A better measure is greenfield investment in production facilities.
Looking at greenfield investment trends we can see that the UK since 2016 has continued to attract more greenfield investment than any of the large EU countries, despite upturns in inflows into Germany and Spain. Moreover, from 2016-2021, the volume of greenfield investment into the UK rose from US$32 billion to US$44 billion, i.e. by over a third (Chart 13). This was the fourth best year since 2003, despite the pandemic – and ‘despite Brexit’.
Picture13
Source: UNCTAD
Conclusions on Investment
Claims that UK investment has been hit hard by Brexit look exaggerated. Total UK investment is close to its long-term trend level and the apparent sluggishness of business investment in recent years looks to be related to several factors not connected with Brexit including the collapse of North Sea oil investment and cyclical factors. The similar weakness of business investment in Germany may also point to the impact of the pandemic. Given these multiple factors, any attempt to blame Brexit for recent trends in UK business investment is little more than guesswork. It is possible that business uncertainty dampened investment (especially in 2017-2019) but it is hard to disentangle this from other factors and business expectations may also have been influenced by overly negative forecasts and misleading reporting of output trends described elsewhere in this report. Claims that FDI has slumped due to Brexit are meanwhile misleading as investment in productive assets has remained strong.
Introduction
International trade issues are central to any assessment of the economic impact of Brexit. From just before the UK Brexit referendum to the start of 2021, when the UK finally exited the EU’s customs union and single market, analyses by the UK Treasury and other bodies argued that –
These claims always looked exaggerated, being based on flawed methodologies, and using extremely pessimistic assumptions. Gudgin, Coutts and Gibson (2016)[24] suggested that the UK Treasury exaggerated the impact of EU membership on UK trade (and thereby the impact of Brexit on trade) by a factor of four. Kee & Nicita (2017)[25] suggested trade barriers faced by UK exporters would be far lower than the Treasury and others claimed and that UK exports to the EU would only fall by a negligible amount. More recently, a damning analysis of the Treasury methodology by Semken and Hay[26] cited ‘methodological issues, unrealistic assumptions, and misrepresentations of established facts’.
In contrast to the catastrophic claims of the Treasury and others, the general view of Brexit-supportive economists was that exiting the EU’s customs union and single market would lead to a modest short-term decline of UK trade with the EU offset over the longer term by a reorientation of trade towards the rest of the world and a better productivity performance due to smarter regulation – the ‘Nike Swoosh’[27] pattern suggested by Gerard Lyons.
UK trade trends since the start of 2021
We now have 18 months or so of trade data to look at to assess how accurate these competing claims have proved to be.
Brexit critics continue to claim large negative effects. Indeed, recent months have seen a deluge of commentators, politicians, and academics arguing that the data so far support their previous predictions. UK trade, we are told, has taken a ‘big hit’ from Brexit, even suffering a ‘rupture’. The UK Office for Budget Responsibility has argued that trade trends since the start of 2021 are in line with pre-Brexit Treasury claims that UK GDP in the long run will be cut by 4% due to Brexit.
There are two versions of the latest trade-related arguments. The first takes a crude look at the available data and tries to show a big negative effect. The second attempts to compare UK trade performance to an alternative path it might have taken in the absence of Brexit. Neither of these approaches stands up to serious scrutiny.
The UK and EU signed a trade deal (the TCA) very late in the day in 2020, giving firms little time to prepare. This contributed to some disruption of UK trade with the EU at the start of 2021, although notably the huge queues of lorries at the border that were predicted failed to appear. The initial disruption proved short-lived, however, with UK exports to the EU recovering through 2021 and early 2022.
Exactly where this leaves UK trade with the EU relative to the pre-Brexit position depends on which data series you use. The simplest approach is just to look the nominal value of UK exports. These reached a record level in July 2022, some 21% higher than the average level of 2018 (probably the best comparison given distortions in both 2019 and 2020 due to stockpiling ahead of Brexit deadlines and due to the coronavirus pandemic).
This is probably not the best measure, however, as recent months have seen UK export values to the EU inflated by large-scale on-shipments of gas at high current world prices. In our view it makes more sense to look at constant price or volume series and best of all to look at volume series that exclude oil and erratic items (such as precious stones) which can distort short term trends. If we do this, then the simple volume series shows UK exports to the EU in July down 5% compared to the 2018 average, while UK exports to the EU ex-oil and erratics were unchanged compared to the 2018 average (see Chart 14).
Picture14
This initial look at UK exports to the EU since 2020 does not show the ‘big hit’ or ‘rupture’ being talked about by many commentators. So where do these excited claims come from?
One source of recent claims is a failure to look at the trade data in sufficient detail. In particular, some observers have been focusing on the series for total UK exports – not UK exports to the EU. If you look at the current or constant price series for total UK exports, they do appear to be somewhat lower than pre-covid levels. But to use this as evidence for a large negative effect on UK exports from Brexit is misleading.
Picture15
First, if oil and erratics are stripped out, UK total exports in July were only around 6% below the 2018 average level. More importantly still, this shortfall was wholly the result of a weakening in UK exports to non-EU countries relative to 2018 – not weaker exports to the EU. In July 2022, exports to the EU ex-oil and erratics were, as previously noted, the same as the 2018 average. But exports to non-EU countries were down by around 11% (Chart 15). Obviously, this cannot be due to Brexit as no significant new trade barriers with non-EU countries have been created.
chart 6
A look at exports to the EU by industry provides some useful further insights. First, the big negative impact of oil and erratics is clear. Oil exports in July 2022 were 24% down on the 2018 monthly average and erratics down 23%. (Note that the the top bar in chart 16 excludes oil).Neither of these big drops can be ascribed to Brexit. The fall in oil exports is the result of a structural decline in output[28] from ageing oilfields in the North Sea – a supply-side effect. Erratic exports, meanwhile, fell in large part due to lower aircraft exports. This looks to be mostly a pandemic effect. The drop began in 2020 and US aircraft exports show a similar fall which presumably cannot be due to Brexit.
Elsewhere, the pattern of performance is varied, with weak performances in road vehicles (again a global effect – connected to the worldwide chip shortage) and clothing (due to the collapse of re-exports of Asian clothing) but strong rises in beverages, scientific and photographic goods, and mechanical machinery. A notable surprise is that meat, dairy, and fish exports were little changed on 2018 levels – despite much publicity about how these sectors were facing acute problems and pre-Brexit estimates that they would face insuperable non-tariff barriers[29] (Chart 16).
Is UK trade ‘underperforming’?
The analysis above suggests that a careful look at the data shows no evidence of a big ‘hit’ to UK trade with the EU since the start of 2021. This conclusion has also been reached by other observers. The National Institute of Economic and Social Research (NIESR), in a notable recantation[30] of its previous view – has accepted that not only have the poor trade numbers predicted before Brexit failed to materialise, but the net trade position with the EU has improved substantially since 2016 (see Chart 17). This implies a positive effect on UK growth from post-Brexit trade developments. Similarly, Sampson et al[31]. report ‘only [a] temporary decline in relative exports to the EU’.
Picture17
With the actual trade data not showing the kinds of massive falls that were predicted before the UK left the EU customs union and single market, some analysts have changed tack and instead tried to show that, even if UK trade has not changed much from pre-Brexit levels, it is still much lower than it might otherwise have been had the UK not left the EU.
The main approach here has been the so-called ‘doppelgänger’ method referred to earlier (Chapter 2). We have outlined our objections to this approach already, including that this approach compares the UK to economies that are structurally very different. It is not obvious why an economy with a very different pattern of exports by product and by destination would be a good guide for how UK exports might have performed in some alternative world. Any past resemblance could just be coincidence.
A simpler and even more powerful objection, however, is to just look at the actual historic trends of UK goods exports to the EU. If we do this it becomes immediately clear that there is no long-term upward trend from which UK exports to the EU might have departed in the last year and a half, or even since 2016. The volume of UK goods exports to the EU, ex-oil and erratics, in July 2022 was slightly above on a linear trend line drawn since 2000
The flat trend in UK export volumes to the EU in turn reflects flat demand in that market. UK exports to the EU tend to track eurozone industrial output quite closely, and eurozone industrial output was at the same level in July 2022 as in 2018 or 2007 (see Chart 18) with eurozone consumer spending also flat over this period. So, the UK’s underlying exports to the EU in recent months look pretty much where you might expect them to be given EU demand.
Exports to non-EU destinations, by contrast, have grown consistently in the last 15-20 years. Some recent analyses, claiming UK exports are underperforming their ‘trend’ growth due to Brexit, reach this conclusion by conflating UK exports to EU and non-EU destinations. As we have already noted, non-EU exports have been surprisingly weak since early 2021 – they are currently around 11% below a long-term trend line. But this cannot be related to Brexit.
Picture18
Services exports
What of UK exports of services, which account for around half of total UK exports? Here too, there have been claims that Brexit has had a negative impact, but again the actual trade data do not support this. Services exports were badly hit in 2020 due to the pandemic which crushed transport and travel trade. But the seasonally adjusted data since the start of 2021 show no obvious impact from the UK fully leaving the EU’s trade and regulatory systems. Instead, UK services exports to the EU have been steadily recovering from the pandemic-related losses of 2020. Indeed, they have grown faster than services to non-EU destinations, which have in turn performed broadly in line with US services exports (Chart 19).
Picture19
Some observers have claimed that the damage was already done in the period from 2016-2019, but again this is not supported by the data. From Q1 2016 to Q4 2019, services exports to the EU rose 27% and those to non-EU destinations by 32%. The difference is very small and probably not to do with Brexit as there is nothing unusual about services exports to the EU growing more slowly than those to non-EU destinations – that has been the pattern for most of the time since 1999.
The trade-productivity link: a house built on sand
A crucial element of the pre-Brexit predictions of huge GDP losses from the UK leaving the EU customs union and single market was the assertion that lower levels of trade would have a big negative knock-on effect on long-term productivity growth. The UK’s Office of Budget Responsibility (OBR) continues to make this claim, arguing[32] that recent UK trade performance is line with a long-term drop in UK GDP of 4% compared to a no-Brexit scenario. Most of this figure comes from the supposed trade-productivity link.
This claim is already rendered dubious by our analysis of underlying shifts in UK trade since the start of 2021. But in addition, claims that changes in trade intensity have a strong causal link to productivity are not well supported by the evidence.
The literature review in Wales et al. (2018)[33] suggests the weight of evidence favours the notion that productivity drives trade, rather than trade driving productivity. UK Treasury studies which have pushed the trade to productivity link in the past have cited the study by Frankel et al. (1999)[34], but this study admits its results are ‘not very precisely estimated’ and only marginally statistically significant.
The association of trade and productivity growth found in many previous Brexit studies is also frequently based on studying large samples of mostly emerging economies. For high income economies, and for the UK alone, no statistical link between trade and productivity is visible. For a sample of twenty high-income OECD economies, there is zero correlation between growth in trade and growth in output per hour between 1980 and 2019 (see Chart 20).
Picture20
Looking just at the UK there seems to be no historical association of trade openness and productivity since the 1960s. Productivity growth dropped in the years immediately after the UK joined the EU in 1973, although trade openness rose modestly. More striking still, the decade or so after the inception of the EU single market in 1992 saw UK productivity growth flat despite a clear rise in the export to GDP ratio. After 2007, UK productivity growth slumped even as the export/GDP ratio trended higher still (see Chart 21).
Picture21
A firm-level study[35] by the Office for National Statistics (ONS) also does not support the notion that Brexit will lead to large negative effects on UK productivity. It shows that exporters to non-EU countries are about 20% more productive than non-exporting firms – but for exporters to the EU, the ‘productivity premium’ over non-exporting firms is minimal. These findings make it hard to argue that reduced exports to the EU, resulting from Brexit, would have large negative effects on aggregate UK productivity.
Conclusions on trade
Recent claims that UK trade has taken a big ‘hit’ since Brexit and that trade developments since the start of 2021 are consistent with a large long-term decline in UK GDP relative to what it would have been in a no-Brexit scenario represent a false narrative:
A full assessment of the trade impact of Brexit will not be possible for some years, especially as it will take time for the impact of new UK trade deals with non-EU countries to start to come through.
However, the performance of UK exports to the EU since the start of 2021 has if anything been better than most Brexit-supportive economists expected and very far away indeed from the catastrophic scenarios outlined by the Treasury and others from 2016-2020. Suggestions that the UK’s trade relationship with the EU needs to be ‘fixed’ (usually implying the UK re-joining the EU single market and/or customs union), made by some UK politicians recently, are at best extremely premature and at worst little more than mischief-making.
An important part of the anti-Brexit narrative is that the vote to leave the EU has led to a collapse in the value of the pound and that this, combined with new barriers to trade and reduced labour supply, means that UK inflation will be higher (and for longer) than it would otherwise have been.
Some prominent Remainers, such as Lord Rose, have suggested that as much as half of the UK’s current inflation has been caused by Brexit[37]. This presumably mean that instead of heading above 10%, the CPI rate might only be 5%, which would make it one of the lowest in the West. That is clearly nonsense.
At first sight, the former MPC member, Adam Posen, has gone even further. A misleading Bloomberg headline[38] in April quoted him as saying that ‘Brexit explains 80% of UK inflation’. In fact, his claim was that Brexit is ‘80%’ of the reason why the IMF is forecasting that UK inflation will be higher than the rest of the G7 in 2023. This was therefore a statement about the difference between inflation in the UK and in other countries – and based on forecasts, not the current rate.
However, that does not stack up either. The main reason why some official forecasters expect UK inflation to be slower to fall in the UK is actually the operation of the Ofgem cap on domestic energy bills. What’s more, this is another example of negative assessments of the economic impact of Brexit having to rely on forecasts, rather than actual data.
Let’s get back to the facts. Chart 22 below simply shows the headline inflation rates for the UK, US and eurozone before and after the vote to leave the EU. It is immediately obvious that the rates have not been significantly different. If there has been any major impact from the Brexit, it is not visible in these data.
Picture22
This also applies specifically to food prices (Chart 23). This is one area where additional trade costs might have been expected to have significant effects, but again there is no evidence of any meaningful divergence.
Picture23
Those looking for a significant impact from Brexit therefore have to fall back on alternative measures of inflation. Adam Posen has argued[39] that we should focus on ‘core’ rates that exclude food and energy because these strip out the direct impact of the recent global supply shocks. He then simply asserts that ‘Brexit is the primary driver of the high and widening inflation differential [on the core rates] between the UK and its European peers’.
This is easy to debunk.
For a start, Posen’s own chart only shows the period from January 2020. The alternative chart below takes a longer view. Straightaway you can see that core inflation is usually higher in the UK than the euro area (even before vote to the leave the EU) and tends to be close to the rate in the US (Chart 24).
Chart 25 explores this further. It shows the difference between core inflation in the UK and in the euro area. In the six years since June 2016 the average core inflation rate in the UK has been about one percentage point (pp) higher than in the euro area. In the six years before June 2016, it was about 0.7pp higher.
Picture24
Picture25
This does perhaps leave a little something to be explained. But Posen simply concludes by saying that ‘any alternative explanation to Brexit would have to offer another Britain-specific reason for the size and timing of the marked divergence in core inflation rates’, without appearing to give any thought to what these alternative explanations might be. Here are two candidates.
First, the UK economy has rebounded far more quickly from the pandemic than most had anticipated, and this has continued into 2022. The UK posted the second strongest GDP growth in the G7 (after Canada) in the first quarter of this year. The latest purchasing managers surveys suggest that the UK continues to weather the global crisis relatively well (Chart 26). This is consistent with the hypothesis that higher core inflation in the UK, like in the US, partly reflects stronger demand, rather than just problems on the supply side.
Picture26
The second alternative explanation is the differences in the ways that national governments have responded to the cost-of-living crisis. The UK government has focused on supporting households by topping up incomes, mainly by cash transfers and cuts in personal taxes. In contrast, other governments have been more willing to intervene directly to lower prices. This will of course now change since the new Truss Administration has decided to adopt energy price controls.
France, for example, has forced the state-controlled energy giant EDF to keep prices down both for households and businesses. This may not have any direct effect on ‘core’ inflation, but it will help to lower the core rate indirectly – by preventing the costs of all sorts of businesses from rising as much as they would otherwise have done.
More recently, Germany has introduced a new 9-euro ticket and other discounts on public transport, which contributed to a fall in ‘core’ inflation in June[40]. But these only lasted three months, with inflation spiking again in September. Inflation is now widely expected to be higher in Germany in 2023 than in the UK.
This is not to say that Brexit has had no impact whatsoever on UK inflation. There are three main channels to consider: the impact of Brexit uncertainty on the currency, the impact on tariff and non-tariff barriers to international trade, and the impact of the end of free movement and other changes on the labour market. But the effects of all of these are overstated.
It is true that sterling fell sharply in 2016, and that this is usually attributed to the vote to leave the EU. Variations of Chart 27 are often used to support this point. This fall probably did also contribute to a pick-up in UK inflation in 2017 (but only to a peak of around 3%). However, the pound has since been relatively stable and actually strengthened (on a trade-weighted basis) in 2021 and early 2022, so cannot explain the recent pick up. Even taking account of the weakness of Sterling in Autumn 2022, the effective (trade-weighted) exchange rate is close to its average level since mid-2016.
Moreover, it is debatable how much the fall in 2016 was due to Brexit.  It pays to take a longer view and look at the broad context. As Chart 28 shows, the fall in sterling in 2016 (which actually began in 2015) only did a little more than reverse the rise between 2013 and 2015.
Picture27
Picture28
Of course, the precise timing and extent of the fall in sterling in 2016 was down to the shock referendum result. But this does not mean that sterling would not have weakened anyway, over a longer period.
Indeed, even before the referendum, many commentators (including the IMF[41]) were already raising concerns that sterling was looking expensive. This was based partly on an unsustainably large current account deficit, which had widened to 6.5% of GDP in the fourth quarter of 2015.
Since then, the current account deficit has been on narrowing trend (Chart 29), though the more recent data have been heavily influenced by Covid distortions. By the fourth quarter of 2021 the deficit has narrowed to 1.2% of GDP, before ballooning out to 6.3% of GDP in the first half of 2022 (the latter was due to other factors, including a jump in the import bill as commodity prices surged and the resumption of dividend payments to overseas investors, but of course this did not prevent the usual suspects from blaming this deterioration on Brexit!).
Picture29
The upshot is that sterling’s weakness is only partly due to Brexit uncertainty. And to the extent that it reflected mistaken fears about the impact on the economy, the pound is likely to recover.
The second channel is new tariff and non-tariff barriers to trade that may have made imports more expensive. But again, these are easily exaggerated. Various business surveys (including the ONS BICS and the Bank of England’s Decision Maker Panel) suggest that additional trade costs due to Brexit account for only a small part of the overall upward pressure on prices.
This leaves the impact on the supply of labour – which is perhaps the most exaggerated of all. An opinion piece by Michael Heseltine (published in the Financial Times on 18th June[42]) made the striking claim that ‘Brexit has forced a million Europeans to go home’. This is nonsense.
This is presumably a reference to Office for National Statistics figures, published in 2021, which suggested that there were almost a million fewer non-UK-born residents living in the UK at the end of 2020 than a year earlier. But even if correct, this number covered both EU and non-EU citizens, and can more reasonably be explained by Covid.
What’s more, the data here are unreliable. Other official estimates suggest that net migration from the EU to the UK has slowed since the 2016 referendum but, aside from a small net outflow in the year to June 2021, it has still been positive.
This makes more sense. After all, nearly six million EU citizens have now been granted ‘settled’ or ‘pre-settled’ status, which includes the right to work in the UK. This is far more than the 3.5 million or so who actually live here.
Even during the pandemic, ONS analysis[43] suggests that Germany, France and Italy all saw bigger declines in their working age population than the UK. This partly reflects normal population ageing, but also the restrictions on international travel.
The reality is that there are labour shortages everywhere across Europe, and in the US, including in sectors such as hospitality, road haulage, and aviation[44]. Relaxing visa requirements for more EU workers would therefore only be a short-term fix – and perhaps not even that. Vacancy rates in the UK are also similar to those in comparable countries in the rest of Europe which have similarly low rates of unemployment, especially Germany and the Netherlands.
Even where businesses do cite a shortage of EU staff, this is not necessarily due to Brexit either. Many other countries, notably Germany again, have also seen migrant workers leave during Covid and not come back. The more persistent problem for the UK appears to be that Covid has encouraged many older workers to retire early.
It is still fair to say that the end of free movement from the EU has probably contributed to labour shortages in some sectors. But this is only one of many factors – and it has been dwarfed by the impact of the pandemic.
Conclusions
In summary, there is no strong evidence that Brexit has had a significant and lasting impact on inflation, either via the currency, trade costs, or the labour market. The small differences in inflation performance – such as they are – can just as easily be explained by non-Brexit factors.
Northern Ireland has been treated differently from the rest of the UK in leaving the EU. Unlike Great Britain, Northern Ireland has been regulated by the Northern Ireland Protocol which leaves Northern Ireland inside the EU’s Single Market for goods and partly within the EU’s customs union. This means a customs border on the Irish Sea with customs declarations and controls on goods entering Northern Ireland from GB. At the same time there is free movement of goods from NI into the EU without any tariffs or customs arrangements. It also means that current and future EU regulations on the production of goods apply in NI. EU rules on VAT also apply in NI as do EU regulations on state aids. Although the Protocol came into legal effect in January 2021 it has never been fully operated. A number of grace periods meant to ease the transition have been extended, essentially unilaterally by the UK. These apply to supermarket goods (which themselves constitute around 60% of imports from GB), medicines, and parcels (including those from Amazon and other online retailers).
The Protocol has become a major political issue within NI. Unionist parties uniformly oppose it and demand its removal. Most unionists regard it as economically damaging but a more fundamental objection is that, in their view, trade barriers between NI and GB weaken the union and make an eventual united Ireland more likely. Unionists also emphasize the undemocratic nature of a Protocol which imposes EU regulations and VAT rules on NI firms without any political representation. Nationalists support the Protocol because it makes Irish unity more likely and stress the advantages of NI firms having customs-free and tariff-free access to other EU and the UK.
The Protocol has become so politically controversial that it seems unlikely that the grace periods will ever end. The position of the largest unionist party, the DUP, is now that the UK and EU can have either the Good Friday Agreement institutions (including the Assembly) or the Protocol but cannot have both.[45]  To advance this position the DUP withdrew from the NI Executive in February 2022 under the provisions of the Good Friday Agreement which gives the main party from each community blocking rights over the continuation of the NI Assembly and other institutions of the GFA. In an attempt to persuade the DUP back into the Assembly the UK Government is progressing a Protocol Bill through Parliament which will give the power to UK Ministers to override the provisions of the Protocol as and when necessary.
The UK Government’s position was described in the July 2021 Command Paper, ‘The Northern Ireland Protocol. The Way Forward’.[46]  This outlined a reformed Protocol in which customs procedures would not apply to goods from GB destined for NI but could apply to goods travelling from GB to the Republic via NI. A two-track system of regulations for goods production in NI would allow companies to operate under either EU or UK regulations (the vast majority are currently identical but may diverge in future). The VAT rules would revert to the UK system and the role of the ECJ in arbitrating on disputes would be removed. This is close to what is sometimes called ‘mutual enforcement’ under which both the UK and Ireland would use legislation to enforce each other’s regulations for goods crossing the land border in Ireland.[47]
Predictions
The main change due to the Protocol is not to alter the access to Irish or EU markets for NI firms, since access remains the same as when the UK was an EU member. Instead, the Protocol imposes constraints on exports from GB to NI. A model-based study[48] from the Fraser of Allander Institute in Glasgow estimates that the increased cost of imports from GB, due to customs administration, is 8% for a fully implemented Protocol. This may deter some imports and lead to a diversion of trade away from GB sources of imports to NI. It will also increase costs for producers and consumers in NI leading potentially to a loss of competitiveness for NI firms and a loss of real income for NI consumers. The study’s estimate is that the long-term impact on the NI economy will be a loss of 2.5% of GDP[49].
Very different results come from a study by the Resolution Foundation. This report[50] uses the model of the LSE’s Centre for Economic Policy previously used by Swati Dhingra and others to analyse the impact of Brexit. This is a theoretical rather than data-based econometric model and incorporates a range of assumptions. The model predicts a small long-term reduction on UK GDP of around 1% due to new trade restrictions with the EU. This impact is increased if it is assumed that the UK fails to adopt future EU regulatory reforms. However, this is a matter of future UK policy and should be viewed as additional to any assessment of the impact of Brexit or the Protocol.
The Resolution Foundation study estimates the impact on output and trade in different sectors and then on regions reflecting the varying sectoral structure of each region. The calculated loss of export trade with the EU is huge with a predicted fall of 38% by 2030[51]. Since actual data up to mid-2022 shows little if any loss in export trade with the EU and a better export performance with the EU than with non-EU destinations, it seems unlikely that this prediction will prove anywhere close to accurate. The estimated impact on NI from this study is a loss of 1.1% of output by 2030 without the Protocol and 0.7% with the Protocol[52]. Hence the Protocol is assumed to provide a small beneficial impact mitigating the overall negative impact of Brexit. In this it differs from the Fraser of Allander study which predicts a negative impact. It is also unclear how the RF result for the Protocol was derived.
Actual Performance
Both within Northern Ireland and outside there has been a barrage of opinion, much of it arguing that NI has done well out of the Protocol and gets the best of both worlds, but with other viewpoints stressing the difficulties caused to traders. The Financial Secretary to the Treasury recently emphasised the huge weight of new administration due to the Protocol including more than ten thousand traders completing a million customs declarations thus far[53].
The view that the Protocol is helping the NI economy received a boost from London’s prestigious National Institute for Economic and Social Research (NIESR) in its Spring 2022 UK Economic Outlook. This reported that ‘Northern Irish output, as measured by GVA, has slightly outperformed the UK average; this is partly an outcome of the Northern Irish Protocol and its special status in the Brexit arrangements, including better trade and investment conditions as part of the EU’s single market and customs union’[54]However, this statement did not specify any period for this observation. The ONS data for GVA in Northern Ireland shows that GVA in NI dipped a little less than GB in the main lockdown in 2020 Q2 and recovered a little more rapidly. Once the Protocol came into force in January 2021, GVA in NI grew more slowly than in GB – 5.5% from 2021 Q4 to 2022 Q2 compared with 7.5% in GB (see Chart 30).
Picture30
Source: ONS Model-based early estimates of regional gross value added (GVA) in the regions of England, Wales, Scotland, and Northern Ireland
NIESR’S own chart clearly shows output NI underperforming since the start of the Protocol in January 2021, with employment the worst of any devolved region. The better performance of NI was during the pandemic in 2020 when NI had easily the smallest decline compared to 2019. In 2021 and 2022, following the introduction of the Protocol only two UK regions grew significantly more slowly than NI and it is thus difficult to claim the protocol is boosting growth in NI.
It is true that NI was the only UK region other than the South East in which GVA in 2022 Q1 was higher than at the end of 2019. Since this was wholly due to a better performance during covid lockdowns, and before the protocol came into force, it cannot easily be described as a consequence of the Protocol itself, which is what the NIESR Outlook claims.
Other evidence from high frequency indicators also shows NI underperforming within the UK. The composite PMI indices which survey business activity show growth in the Northern Ireland private sector consistently underperforming that in the UK as a whole since the start of 2021, when the Protocol came into force. The underperformance has been particularly notable over the last five months during which the PMI surveys show Northern Ireland’s output contracting while that of the UK has continued to expand or stay broadly flat (Chart 31)[55].
Picture31
The ONS’s regional trade data also contradict the idea that NI has either outperformed the rest of the UK or been ‘shielded’ from the effect of Brexit by the NI protocol. In the four quarters to June 2022, GB exports to the EU were 23% higher than in the four quarters to December 2020 (i.e. the period just before the protocol and TCA came in) compared to an 11% rise in NI exports to the EU. Part of the relatively strong GB export performance relates to exports of mineral fuels, but even if we strip these out, the picture is similar: GB exports to the EU up 14% from Q4 2020 while those in NI were up 8% (Chart 32). So the evidence from the UK regional trade data suggests NI has underperformed GB in terms of EU exports, despite the protocol.
Much attention has focused on Irish data apparently showing a large rise in imports from NI and (possibly) NI firms gaining market share in Ireland versus GB producers. There are reasons for scepticism about this data, however. Irish data has over the years consistently recorded much lower cross-border trade flows with NI than the data from NISRA in NI, and some of the recent recorded rise in Irish imports from NI may just reflect that gap closing due to higher ascertainment.
In addition, it is likely that a large chunk of the higher recorded Irish imports from NI is really goods from GB being re-routed via NI to dodge increased border bureaucracy at Irish ports. A large share of the recorded rise in Irish imports is in just three ‘erratic’ sectors – medical/pharmaceutical, electric current and ‘unclassified’ items. The rise in medical/pharma imports (which alone is around a third of the total recorded rise in Irish imports from NI) is implausibly large given the modest scale of that industry in NI and is almost certainly re-routed GB goods.
Picture32
The NIESR Outlook also claims that ‘Closer links with the EU, through trade and also potentially labour mobility, have benefited Northern Ireland post-Brexit’, but unaccountably at the same time shows that ‘employment growth in Northern Ireland falls well below the UK average and is not projected to return to pre-pandemic levels by 2025’. The employment record in Chart 33 shows that NI has generated jobs up to the end of 2019 at about the same rate as England or Wales and faster than Scotland. but experienced a larger loss of jobs during the pandemic. In the Protocol period, since the start of 2021, there has been a minor recovery relative to GB but employment in NI remains well (4%) below its 2019 peak unlike GB where employment is closer to full recovery.
Picture33
Source: ONS Labour Force Survey
Conclusion
The idea that Northern Ireland’s freer access to EU markets will boost, or has boosted, economic output and growth relative to that in GB has a strong appeal to many commentators. This has even infected the analysis by NIESR which concludes that output has grown faster than in GB partly due to the NI protocol. However, the data, and even the GVA data cited by NIESR itself, does not support this conclusion. NI has been one of the UK’s slowest growing regions in the period since the start of 2021 during which the Protocol has been in force. NI has also the UK’s worst record for employment since the pre-pandemic years.
The economic record over recent years is much influenced by the pandemic, both in 2020 and in the recovery since then. It is premature to attempt to divine any independent impact of the protocol in NI from the data and it may be several years before this is possible. That said, the most detailed modelling exercise of the impact of the protocol so far, the Fraser of Allander study, points unambiguously toward the protocol being a negative for the economy of Northern Ireland.
Overview
Ahead of the 2016 referendum there were widespread claims that the UK financial sector would suffer badly from Brexit[56], and negative assessments have continued since the vote[57]. As a result of the UK leaving the single market and giving up its ‘passporting’ rights allowing easy access to EU financial markets, we were told that jobs and activity would decamp en masse to the EU. Tens of thousands of bankers would move to Paris and Frankfurt and UK tax revenues would be hard hit. One particularly doom-laden account claimed up to 230,000 UK finance sector jobs might be lost[58]. The relatively thin provisions for financial services in the UK’s trade deal with the EU signed at the end of 2020 sparked a fresh round of agonising.
In the event, these predictions have proved laughably wide of the mark. There have indeed been some adjustments by some London-based firms in response to the changed trading environment. But the tsunami of job losses that was predicted has totally failed to materialise. E&Y initially claimed 10,500 jobs would go on day one[59], but industry estimates now suggest just a few thousand jobs have moved to the EU or been created there due to Brexit – and that this process has largely run its course[60]. Moreover, total employment in the City saw strong growth after the referendum, with a rise of 100,000 workers (20%) from 2015-2020[61].
Nor has the movement of activity been one way. Close to 1,500 EU firms applied for permission under the temporary permissions regime to operate in the UK, with 1,000 of these planning to establish their first UK office[62]. Some of these will need to recruit within the UK.
What about the UK’s overseas earnings from financial services?  There is no evidence of any Brexit-related decline in UK financial services exports. UK financial services exports to the EU were £5.8bn in 2016 Q1 (the quarter before the referendum), £5.9bn in 2020 Q4 (just before the UK left the EU single market) and £6.2bn in 2022 Q1. Total UK financial services exports were £18bn, £19.8bn and £20.9bn in the same periods (Chart 34). Since the UK left the EU single market, financial services exports to the EU and non-EU have grown at a similar pace (5% and 6% respectively).
Picture34
Source: ONS
With the hard evidence again failing to show the disaster widely predicted, opponents of Brexit have jumped on press stories purporting to show the UK financial sector losing out. One of these stories[63] claimed that Amsterdam had overtake the UK as the leading share trading hub in Europe. This story was misleading, referring only to trade in EU shares (only a subset of the international trading in London) and especially because it failed to recognise that the bulk of London share trading never makes it onto the major exchanges but instead occurs off-exchange within large trading firms and private exchanges[64].
Other data such as the Z/Yen survey also point to London maintaining, or even strengthening its position as a leading global financial centre, closing in on New York[65], and by far the leading European financial centre. The BIS triennial survey shows that the UK has retained its over 40% global market share in FX trading[66].
ONS data on tax revenues from the financial sector meanwhile confirm the claimed collapse of these revenues has entirely failed to materialise. Total receipts in 2015-2016 including PAYE, corporation tax, the bank levy and the bank surcharge totalled £27.3 billion, but this total rose to £31.2 billion in 2021-2022[67]. A broader estimate published by the City of London corporation showed UK financial services contributing a record £75.6 billion in tax revenues in the year to March 2020[68].
 
Conclusion
As with so many other areas, the widespread predictions that Brexit would cripple the UK financial industry have proved a mirage, entirely unsupported by the actual data. But the importance of the UK financial services industry as a contributor to the UK’s external earnings and tax revenues means there is no room for complacency going forward. The EU will continue to try to attract London business and launch regulatory assaults on the City to that end. For this reason, the UK needs to chart a smart and clearly independent regulatory path, avoiding any exposure to damaging changes in EU regulations either via formal regulatory alignment or informal shadowing.
This approach is also vital to preserve the UK sector’s competitiveness against its real global rivals, particularly New York. The UK authorities need to act boldly to strip away damaging legacy rules (including areas like MiFID and Solvency II) from the period of EU membership, something that they have so far moved quite slowly on despite a plethora of reports and consultations. As with so many areas, the success or otherwise of the UK financial services sector after Brexit depends not so much on the immediate changes related to Brexit but to what the government and the sector does afterwards.
Eighteen months after the UK left the EU customs union and single market, apocalyptic predictions about the negative impact of Brexit have proved illusory. Nevertheless, there have been many attempts to show that Brexit is damaging, or has damaged, the UK economy. These attempts are based on flawed analyses, often featuring tortuous attempts to twist the available data to fit a pre-conceived anti-Brexit narrative.
A careful reading of the evidence shows that while there is little evidence yet that Brexit is doing much to help the UK economy, neither is there evidence of much harm. This is significant because it was generally agreed, even by Brexiteers, that there would be initial difficulties.
UK growth has performed relatively well in the post-Brexit period, compared to the other large EU economies. GDP appears to be pretty much where it might have been in the absence of Brexit. Attempts to show otherwise rely on unconvincing counterfactual analyses, questionable forecasts, and the misinterpretation of measurement issues. Similarly, while investment performance has been far from stellar, attempts to link its recent sluggishness to Brexit gloss over various other important factors and often rely on misleading comparisons. The UK also continues to attract a disproportionately large volume of greenfield foreign direct investment.
On trade, there were reductions in exports and imports to the EU in early 2021 linked in large part to the lack of notice of the new trade arrangements and to stock-building ahead of the early 2021 deadline. But the decline in trade proved short lived, with underlying levels of UK exports to the EU soon regaining pre-Brexit levels and imports comfortably exceeding them.
There have of course been problems for some firms, especially smaller firms some of whom may have given up exporting to the EU due to new administrative costs but if so, the aggregate impact seems slight. Notably, the export performance even of sectors most exposed to new trade barriers such as food and fish has been surprisingly resilient. All of this was achieved while Covid-related lockdowns came and went which demonstrates the resilience of the majority of firms.
The current problem of inflation is affecting most EU and North American economies as much as the UK and has little connection with Brexit. The City of London continues to thrive despite transferring a few thousand jobs to the EU to get around new regulations. Equally EU firms have moved jobs into London.
This is a relatively good start to life after Brexit, especially since few changes in regulations have yet been made. If we assume that future divergence in regulation will only be made when it assists economic growth in the UK then post-Brexit conditions should favour the UK. The good start confirms that the success in negotiating a free trade agreement, the Trade and Cooperation Agreement, in December 2020 was far-sighted even if it came at the cost of the Northern Ireland Protocol which remains unfinished business. We will never know how the UK economy might have fared without an FTA but what we have seems a good basis for future prosperity, although that future outside the EU will of course depend on policy decisions still to be made.
Finally, it is reasonable to ask why it has been necessary to write a report debunking the pessimistic studies and articles which depict Brexit as a failure.  We know that 90% of staff in higher education said they would vote remain in 2016[69] (with 40% saying they might leave the country if Leave won). A similar proportion of economists said that the Brexit would damage the UK economy[70] including most professors and many winners of the economics Nobel prize[71]. Many economics journalists took the same view. It is perhaps not surprising that at least some of these observers are keen that their pessimistic predictions should be borne out and are willing to stretch arguments to breaking point in order to claim that they are.
What does this say about the economics profession? We assume that much of the inaccurate work comes from not interrogating data sufficiently rigorously and settling too quickly on evidence appearing to support the anti-Brexit case. In the case of the Treasury’s 2016 reports on Brexit it seems likely that they were defending a government preference for a No vote in the Referendum. This is of more than historical importance and not only because some are attempting to misinterpret current data to argue for rejoining the EU Single Market. It is also important for a range of wider economic policy debates. If the profession cannot be trusted to put ideology aside in economic analyses, then policy debates will be distorted, and the public may lose even more faith in what Michael Gove called ‘experts from organisations with acronyms’.
 
[1] https://www.ft.com/content/a31b4b8e-f9fc-4f1e-84c1-3632f194d05a
[2] https://www.theguardian.com/politics/2022/jun/23/does-david-frost-claim-brexit-is-working-stack-up-economic-impact-northern-ireland-protocol
[3] https://www.thetimes.co.uk/article/counting-the-cost-of-the-brexit-vote-six-years-on-rd2pns2wp
[4] https://www.theguardian.com/politics/2022/jun/12/is-brexit-working-four-key-tests
[5] https://www.thetimes.co.uk/articl,e/brexit-outside-the-eu-single-market-isnt-working-l2fsh50b7
[6] https://www.ft.com/content/7a209a34-7d95-47aa-91b0-bf02d4214764
 
[7] One crisis killed productivity – will this one resurrect it? Sunday Times Business section July 3rd, 2022.
[8] In these charts using OECD data for real GDP the figures for the UK in 2020 and 2021 are adjusted in line with the ONS recommendation that current price values are more representative for international comparisons in these years. This reflects international differences in the measurement of real output in public services including health and education. Current price GDP in the UK grew 2.5% slower than the OECD average in 2020 and 1.1% faster in 2021.  We have thus adjusted the UK data for constant price GDP in 2020 and 2021 to match the OECD average growth rate for real GDP multiplied by 0.975 in 2020 and 1.011 in 2021.
[9] Wider comparisons, for example with the OECD are less appropriate due to the inclusion of faster growth Latin American and Eastern European countries as well as outliers like Ireland where the headline GDP data is hugely exaggerated by profit shifting by multi-national companies.
[10] What can we know about the cost of Brexit so far? | Centre for European Reform (cer.eu)
[11] This uses material from a recent Policy Exchange article ‘Why the Centre for European Reform is wrong about Brexit – Policy Exchange’.  https://policyexchange.org.uk/why-the-centre-for-european-reform-is-wrong-about-brexit/
[12] https://www.intelligencesquared.com/events/debate-we-were-right-to-brexit/
[13] https://www.briefingsforbritain.co.uk/why-do-so-many-economists-get-brexit-wrong/
[14]https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/internationalcomparisonsofgdpduringthecoronaviruscovid19pandemic/2021-02-01
[15] https://ukandeu.ac.uk/working-paper/expecting-brexit/
[16] https://eprints.lse.ac.uk/83612/1/dp1478.pdf
[17]https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/517415/treasury_analysis_economic_impact_of_eu_membership_web.pdf/  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/524967/hm_treasury_analysis_the_immediate_economic_impact_of_leaving_the_eu_web.pdf/
[18] https://www.cbr.cam.ac.uk/wp-content/uploads/2020/08/wp483.pdf
[19] https://www.cbr.cam.ac.uk/wp-content/uploads/2020/08/wp493.pdf
[20] http://www.maxpo.eu/pub/maxpo_dp/maxpodp21-3.pdf
[21] https://obr.uk/box/the-effect-on-productivity-of-leaving-the-eu/
[22] See for example https://www.piie.com/research/piie-charts/uk-and-global-economy-after-brexit
[23] For examples of these kinds of predictions, see for example UK Treasury (2016) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/517415/treasury_analysis_economic_impact_of_eu_membership_web.pdf, UK Cross-Whitehall EU Exit Analysis https://www.parliament.uk/globalassets/documents/commons-committees/Exiting-the-European-Union/17-19/Cross-Whitehall-briefing/EU-Exit-Analysis-Cross-Whitehall-Briefing.pdf, Bassilakis et al. (2018) https://www.intereconomics.eu/contents/year/2018/number/5/article/if-nothing-is-achieved-who-pays-for-the-brexit.html, Van Reenen (2016) https://www.brookings.edu/wp-content/uploads/2017/02/brexits-long-run-effects-john-van-reenen.pdf
[24] https://brexit.hypotheses.org/files/2017/01/The-Macro-economic-impact-of-Brexit.pdf
[25] https://voxeu.org/article/short-term-impact-brexit-uk-exports
[26] http://www.maxpo.eu/pub/maxpo_dp/maxpodp21-3.pdf
[27] https://www.dailymail.co.uk/debate/article-3660275/GERARD-LYONS-Nonsense-Britain-s-going-global-ll-just-fine.html
[28] https://www.reuters.com/article/us-northsea-oil/uk-north-sea-oil-output-to-resume-decline-after-brief-respite-idUSKBN1H213Y
[29] The AHDB reported in August that red meat exports from the UK had reached record levels https://ahdb.org.uk/news/value-of-red-meat-exports-from-the-uk-reach-record-levels
[30] https://www.niesr.ac.uk/wp-content/uploads/2022/02/BOX-A-Improved-trade-with-EU-since-Brexit.pdf
[31] https://cep.lse.ac.uk/pubs/download/dp1847.pdf
[32] https://obr.uk/efo/economic-and-fiscal-outlook-october-2021/
[33] https://escoe-website.s3.amazonaws.com/wp-content/uploads/2020/07/13160018/ESCoE-DP-2018-09.pdf
[34] https://www.jstor.org/stable/117025?seq=1#page_scan_tab_contents
[35] https://escoe-website.s3.amazonaws.com/wp-content/uploads/2020/07/13160018/ESCoE-DP-2018-09.pdf
[36] https://dailybusinessgroup.co.uk/2022/02/scottish-salmon-exports-to-eu-surge-29/
 
[37] https://twitter.com/LBC/status/1547495452416905218?s=20&t=amSLeqKKEdbOrDJe4DYj1A
[38] https://www.bloomberg.com/news/articles/2022-04-27/brexit-explains-80-of-u-k-inflation-former-boe-official-says#xj4y7vzkg
 
[39] https://www.piie.com/research/piie-charts/brexit-driving-inflation-higher-uk-its-european-peers-after-identical-supply
 
[40] https://www.destatis.de/EN/Press/2022/07/PE22_296_611.html
 
[41] https://www.imf.org/external/pubs/ft/scr/2016/cr16168.pdf#page=13
[42] https://www.ft.com/content/d95a0712-6ad0-4a18-858b-dffd8fce7dea
[43] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/internationalcomparisonsoflabourmarketsoverthecoronaviruscovid19pandemic/2022-06-06
[44] Labour shortages felt all over Europe – EURACTIV.com
[45] Lord Dodds ‘The Protocol must go’. Briefings for Britain. https://www.briefingsforbritain.co.uk/the-Protocol-must-go/
[46]  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1008451/CCS207_CCS0721914902-005_Northern_Ireland_Protocol_Web_Accessible__1_.pdf
[47] J H H Weiller, D Sarmiento, Sir J Faull, An Offer the EU and UK cannot refuse.  https://verfassungsblog.de/an-offer-the-eu-and-uk-cannot-refuse/
[48] Duparc-Portier G and Figus G (2021) The impact of the new Northern Ireland Protocol: Can Northern Ireland enjoy the best of both worlds?  Regional Studies.
[49] Duparc-Portier G and Figus G (2021) op cit.
[50] https://www.resolutionfoundation.org/app/uploads/2022/06/The-Big-Brexit_.pdf
[51] https://www.resolutionfoundation.org/app/uploads/2022/06/The-Big-Brexit_.pdf  p51
[52] Most of this predicted 0.7% reduction on output in NI by 2030 derives from the assumption that the UK fails to match future EU regulatory reforms that reduce intra-EU trade barriers.
[53][53] https://www.telegraph.co.uk/politics/2022/09/01/northern-ireland-needs-system-cuts-red-tape-encourages-trade/
[54] https://www.niesr.ac.uk/wp-content/uploads/2022/05/UK-Economic-Outlook-Spring-2022.pdf   p49.
[55] The inclusion of the retail sector in the Northern Ireland PMI means comparisons with the UK one are not precisely like-for-like but the sectoral breakdown of the Northern Ireland PMI suggests manufacturing and services are underperforming the equivalent UK-wide sectors.
[56] See for example here https://blogs.lse.ac.uk/businessreview/2016/06/15/brexit-could-bring-a-potential-catastrophe-for-the-uk-financial-sector/
[57] https://www.dw.com/en/the-city-of-london-dodges-brexit-bullet-for-now/a-60406853
[58] See here https://www.belfasttelegraph.co.uk/business/news/brexit-could-cost-uk-more-than-230000-finance-jobs-35357851.html
[59] https://www.theguardian.com/politics/2017/dec/11/brexit-city-of-london-jobs-ey-dublin-frankfurt
[60] https://www.insurancejournal.com/news/international/2019/02/05/516763.htm
[61] https://www.cityoflondon.gov.uk/supporting-businesses/economic-research/research-publications/city-statistics-briefing#:~:text=There%20are%20550%2C000%20workers%20in,more%20jobs%20than%20in%202015.&text=Home%20to%20one%20of%20the,international%20workforces%20across%20the%20country.
[62] https://www.financialreporter.co.uk/finance-news/1500-eu-based-firms-applied-for-fca-regulation-ahead-of-brexit.html
[63] https://www.ft.com/content/3dad4ef3-59e8-437e-8f63-f629a5b7d0aa
[64] See https://www.spectator.co.uk/article/no-amsterdam-hasn-t-overtaken-the-city
[65] See https://markets.businessinsider.com/news/stocks/biggest-financial-centers-london-nears-new-york-2020-9-1029622179?miRedirects=1
[66] https://www.bis.org/statistics/rpfx19_fx.htm
[67] https://www.gov.uk/government/statistics/paye-and-corporate-tax-receipts-from-the-banking-sector-2022
[68] https://www.accountancydaily.co/financial-services-sector-pays-record-ps756bn-taxes
[69] https://www.timeshighereducation.com/news/european-union-referendum-nine-out-of-ten-university-staff-back-remain
[70] https://www.brookings.edu/wp-content/uploads/2017/02/brexits-long-run-effects-john-van-reenen.pdf.  https://www.theguardian.com/politics/2016/may/28/economists-reject-brexit-boost-cameron
[71] Economists warn against Brexit vote | Business | The Times
About the Authors
Graham Gudgin is research associate at the Centre for Business Research at Judge Business School, University of Cambridge. He was formerly Fellow in economics at Selwyn College and later Director of the Northern Ireland Economic Research Centre, and Special Advisor to the First Minister in NI from 1998 to 2002. He is currently Chief Economic Advisor at Policy Exchange, an advisor to the Cabinet Office and a member of the Modelling Panel at the Department for International Trade.
Julian Jessop is an independent economist and Fellow at the Institute of Economic Affairs. He has thirty-five years of experience gained in the public sector, the City and consultancy, including stints at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He now works mainly with thinktanks and educational charities and is a regular commentator in the media.
Harry Western is the pen name of a senior private sector business economist
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