Predictions of £40bn hit to public finances from Brexit ‘correct’

On the ninth anniversary of the leave vote, the OBR’s estimate of a 4 per cent loss in the UK’s long-run productivity has been borne out by declining investment and trade volumes, according to John Springford, an associate fellow at the Centre for European Reform.

The 4 per cent productivity loss translates to an approximate £40 billion tax loss for the exchequer between 2019 and 2024, a period in which the government raised taxes by £100 billion. “A large chunk of [the tax rises] would not have been necessary if the UK had voted to remain in the EU or chosen a softer form of Brexit,” Springford said.

...Springford, whose findings were published by the Constitution Society and the Federal Trust, tested the OBR’s projections and found the consensus view “has been borne out”. Springford has also devised a method to calculate the impact of Brexit, which compares the UK’s economic outcomes with similar economies since 2016, and found a growth impact of around 5 per cent of GDP, similar to the OBR’s figure.

Springford said it was “undeniable” that Brexit had hurt the UK’s economic growth prospects and its trade volumes. “The question is about the magnitude of the effect and we remain a little in the dark because it is incredibly difficult to isolate the Brexit effect,” he said, citing factors such as the pandemic, which complicate how to judge whether trade and investment was lower simply as a result of the UK leaving the single market and customs union.

...Estimates from Springford and economists including Jonathan Haskel, a former Bank of England rate-setter, calculate an investment gap of 10 per cent if the UK had stayed in the EU.