Let's go back in
time for a minute.
It's June the
24th, 2016, the day
after the Brexit referendum.
To most pundits'
surprise, the UK
has narrowly voted
to leave the EU.
But something
strange is happening.
The economy isn't falling off
a cliff, as some had predicted.
There's no imminent,
self-inflicted recession.
And the Treasury's prediction
that 800,000 jobs are about
to disappear - its
worst-case scenario -
also appears overcooked.
So what's actually happened
to the economy since the vote?
And what impact will
Brexit really have?
No.
True, the pound dropped 10%
immediately after the result.
There's been little
recovery against the euro.
But the pound has climbed
back up to the $1.35 mark.
Inflation has risen.
So things like
bread and chocolate
are more expensive
for you and me.
And the economy is
about 1.9% smaller
than pro-Brexit
economists expected
it to be at this point.
That's a £38bn annual loss.
What about the future?
On March 29th, 2019, the day
Britain officially leaves
the EU, not much will change.
The transition deal means
the UK will probably
stay in the single market and
customs union until December
the 31st, 2020.
Businesses can
rest easy, for now,
knowing that goods, capital,
people, and services will
continue to flow freely.
What's less certain is what
sort of customs arrangement
the UK and EU will
agree on and what
trade deals the
UK can strike when
it's free to set its
own tariffs on goods.
Ah, yes, those top
secret documents,
the ones that show the
government's own analysis
of how Brexit will
affect the economy.
So what do they tell us?
For a start, they say
that almost every sector
of the economy in
every UK region
will be worse off under all
likely Brexit scenarios.
Depending on how
hard the Brexit is,
the losses are
expected to be large,
2% of national income or £40bn
a year if Britain stays a member
of the single market and adopts
Norway's relationship with
the EU, 5% of national income
if Britain just has a free trade
deal with the EU, or
8% of national income
if there's a very hard Brexit
and Britain trades with the EU
under World Trade
Organisation rules.
In each case, the
government expects
tax revenues will be hit,
even though less money will
be transferred to Brussels.
The net losses are expected
to be between £20bn and £80bn
a year.
Both the Bank of
England and the Office
for Budget
Responsibility now think
the UK economy won't grow
faster than about 1.5% a year.
But, of course, all of
this economic modelling
depends on a lot on
things we don't know.
Will manufacturers be able to
import parts from across the EU
without big delays at borders?
Can companies hire the
EU workers they need?
Will there be new
regulatory barriers erected?
Companies are reluctant to
invest heavily in the UK
until there's clarity over the
outcome of the Brexit talks.
Britain's long-term economic
relationship with the EU
should become clearer
in the autumn.
Oh, and one more thing.
The EU withdrawal bill
still has to make its way
through Parliament and
clear a lot of hurdles
before anything is set in stone.
