A study by a senior official at the UK central bank found that Britain has suffered a loss of business investment worth £29 billion since the 2016 Brexit referendum.

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

He said the UK immediately began to fall behind the trend of the previous six years after Brexit and “suffered much more” when compared to other major industrialised economies.

In an interview with the web newsletter the Overshoot, Haskel addressed “the vexed question of Brexit.”

He was asked if there had been any studies about what the impact would be if the UK were hypothetically to rejoin the European Union, and what that would imply for longer term productivity outlook.

Haskell said: “I don’t think there have been any studies of the UK rejoining.

“The studies are mostly inferring the cost of Brexit using gravity equations, which is to say one looks at the volume of trade between country A and country B controlling for relative GDPs and distance and stuff like that.

“What you notice is that when countries join trading blocs, trade goes up. There are very few examples of countries withdrawing from trading blocks.

“So those gravity studies of Brexit are all based on the negative of the positive effect of joining, if you see what I mean.

“It might well be that the impact of coming out of a trading bloc is different from the inverse of the positive effect of joining.

“Now in the MPR chart 3.6 shows that the level of goods trade is around 10-15% below what we think it would otherwise be.

“We really don’t know what’s happening with services trade, although that would be confounded by the impact of the pandemic on travel and tourism.

“Step two of the argument is then to multiply that change in goods trade by some multiplier, which tells you what the decline in GDP is going to be based on an assumed relationship between trade and GDP.

“That gives you a level change predicted for Brexit of about 3.2% on GDP, which is what the Bank has been talking about.

“The Treasury has got a similar estimate. That is the productivity impact of the reduction in trade—a reduced-form estimate from the broad relationship between GDP and openness.

“Let me tell you one more thing, if I may, which is not in the report, but is a little calculation that we have done about investment.

“Imagine that business investment hadn’t basically flattened out after the 2016 referendum and instead rose as real investment did in more or less every other country.

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

“If you do all of that you find that the current productivity penalty is about 1.3% of GDP. That 1.3% of GDP is about £29 billion, or roughly £1000 per household.

“At the end of the forecast period, the penalty goes up to something like 2.8% of GDP, which is very close to the 3.2% number we found using the totally different reduced form methodology based on goods trade volumes.”