Brexit is costing the UK economy £100 billion a year, with the the effects spanning everything from business investment to the ability of companies to hire workers, according to analysis by Bloomberg Economics.
The analysis three years after the UK left the European Union “paints a bleak picture of the damage done by the way the split has been implemented by the Conservative government.”
Economists Ana Andrade and Dan Hanson estimate the UK economy is 4% smaller than it might have been, with business investment lagging significantly and the shortfall in EU workers widening.
“Did the UK commit an act of economic self-harm when it voted to leave the EU in 2016? The evidence so far still suggests it did,” Andrade and Hanson wrote in a note published Tuesday.
“The main takeaway is that the rupture from the single market may have impacted the British economy faster than we, or most other forecasters, expected.”
The Bloomberg study acknowledges that calculating how much output has been lost due to Brexit is neither “easy nor precise,” not least because leaving the EU coincided with the seismic disruptions caused by the coronavirus pandemic.
However, Bloomberg reported that it is clear that UK economic performance started to diverge from the rest of the Group of Seven following the 2016 vote to leave the EU, and has widened since.
Bloomberg reported that the underperformance is partly explained by business investment as firms put spending decisions on hold because of uncertainty about what life outside the EU would mean.
At about 9% of GDP, UK business investment lags the Group of Seven average of 13%.
The UK economy continues to be blighted by shortages of workers — with Brexit playing a big part.
Hanson and Andrade estimate that there are 370,000 fewer EU workers in employment in the UK than might have been the case had the UK stayed in the single market, a figure only partially offset by the arrival of non-EU citizens.
“Scarcity of labor adds to inflationary pressure in the short-term and constrains potential growth further out,” the economists wrote.
“That’s not good news for an economy facing bleak long-term prospects, with trend growth of a little over 1%.”