“I have three priorities for our economy: growth, growth and growth.”
The concept formed the centrepiece of Liz Truss’ speech to the Conservative Party conference, and the new British prime minister mentioned the word more than two dozen times.
“For too long, our economy has not grown as strongly as it should have done,” Truss said. She underlined the importance of growth to the UK economy by linking it to the need to cut taxes — “putting up a sign that Britain is open for business” — slash regulation, boost investment, and improve public services.
Castigating “those who try to stop growth”, she vowed she would “not allow the anti-growth coalition to hold us back”.
And she painted Brexit in entirely positive terms, saying the government was “seizing the new-found freedoms outside the European Union”, and “making the most of the huge opportunities Brexit offers”.
Yet several reports say one significant factor to have impacted negatively on Britain’s growth and economy — also creating a barrier to future performance — is Brexit itself.
Post-2016 period: After the UK voted to leave the EU
Some surveys have said the vote for Brexit in the June 2016 referendum had a damaging effect on the British economy, even before the UK actually left the EU and its economic structures.
“Voting for Brexit had large negative effects on the UK economy between 2016 and 2019, leading to higher import and consumer prices, lower investment, and slower real wage and GDP growth”, wrote two economists from the London School of Economics (LSE) in a paper for the think-tank UK in a Changing Europe, published this year.
This happened even though at this stage “there was little or no trade diversion away from the EU”, the report said.
Another report by the Centre for Economic Policy Research (CEPR) reaches a similar conclusion. “Even before Brexit has actually taken place, the referendum shock of June 2016 has already had substantial economic costs,” its study said in March 2020, updating its previous analysis from three years earlier.
“We estimate that the Brexit depreciation increased UK consumer prices by 2.9%. This represents an £870 per year increase in the cost of living for the average UK household,” its four authors said.
An assessment by Investment Monitor in January 2022 found that UK growth trailed that of leading European counterparts in the years following the Brexit vote, even though it had been ahead at the start of 2015, and again at the time of the 2016 referendum.
“Based on figures from the OECD, UK GDP grew by 14.3% between Q2 2016 and Q3 2021. This is a smaller growth rate than four of the EU’s largest economies. During the same period, Germany had the highest indexed growth rate at 32.2%, followed by Spain (25.6%), France (23%) and Italy (16.3%),” it said.
Post-2021: After Brexit took effect
This year has seen economists begin to separate the economic damage done by Brexit from that wrought by the COVID pandemic.
In June a report by John Springford of the Centre for European Reform (CER) estimated that in the final quarter of 2021, GDP (gross domestic product) was 5.2% smaller, investment 13.7% lower, and goods trade 13.6% lower than what they would have been had the UK remained in the EU.
He added that tax rises imposed by Boris Johnson’s then government ” would not have been needed if the UK had stayed in the EU (or in the single market and customs union)”.
Two other reports cast a shadow over Liz Truss’ desire to advertise Britain as “open for business”.
The UK’s Office for Budget Responsibility (OBR) reported in March that the UK had “missed out on much of the recovery in global trade,” amid the recovery from the pandemic, noting that the UK “appears to have become a less trade intensive economy”.
“The Big Brexit” published in June by the Resolution Foundation think-tank and the LSE found that a drop in British “trade openness” — measured as a share of GDP — showed a much higher fall than in countries with similar trade profiles, such as France.
In May a report by the Peterson Institute for Economics found that Brexit was “driving inflation in the UK higher than its European peers”, despite suffering the same economic shocks from Russia’s war on Ukraine and soaring energy prices. It blamed in particular labour shortages resulting from the end of the free movement of EU migrant workers to the UK, as well as new trade barriers.
In September City A.M. reported that the number of UK businesses exporting to the EU had fallen by a third in 2021 compared to 2020, due to the extra red tape they faced when trading with the bloc. It quoted figures from the UK’s Revenue and Customs department HMRC.
An earlier study by the LSE, from April, found that Brexit caused ‘major disruption’ to both EU-UK exports and imports, with many British firms stopping trade with the EU.
Eurostat data on EU trade with the UK published in March said goods imports from the UK to the EU in 2021 declined by nearly a quarter relative to 2019, while the value of services imports from the UK fell by nearly 7% over the same period.
The UK left the EU at the end of January 2020, and the new rules came into force when a transition period expired on December 31 that year. Its departure from the EU’s single market and customs union, and the trade deal negotiated by then prime minister Boris Johnson, created significant barriers to trade with the bloc.
For both Conservatives and Labour, Brexit is done
Both the UK’s ruling party and main opposition agree that there is no going back on Brexit.
“We are the party who got Brexit done,” trumpted Liz Truss in her conference speech in Birmingham.
In a speech in July, Labour leader Sir Keir Starmer said he “couldn’t disagree more” with those who wanted Brexit reversed — instead offering a new slogan of “Make Brexit Work”.
There are understandable political imperatives behind such stances, and they may explain why Brexit often features little in debates over the UK’s current economic plight.
But many critics of the government and opposition alike say the failure to face up to the reality of the UK’s EU exit — and the barriers created with its closest trading partner — mean the complexities of the situation are not being properly understood.