The Impact of Brexit
The Impact of Brexit
- Jonathan PortesJonathan PortesKing's College London
Summary
Brexit resulted in major changes to the United Kingdom’s economic relationship with the European Union. The U.K.–E.U. Trade and Cooperation Agreement provides for tariff-free trade but has also resulted in the introduction of customs controls and various non-tariff barriers. In addition, the ending of free movement of workers between the United Kingdom and the EU was accompanied by major changes to the UK’s system for work-related migration.
These changes have resulted in a reduction in UK trade compared to other advanced economies, with goods exports most adversely affected. However, the proportion of overall UK trade that is with the EU does not yet appear to have fallen. Investment has also suffered. However, a fall in migration from EU countries has been at least offset by very large increases in migration from the rest of the world, particularly in the health sector.
Overall, UK GDP growth has underperformed synthetic counterfactuals by about 5% since the Brexit referendum, but a substantial proportion of this is likely to reflect factors not directly related to Brexit: comparisons with other large European economies are much less negative. Nevertheless, Brexit has had a negative impact on growth. Looking forward, this impact is likely to grow, although it could in part be offset by improvements to the UK’s regulatory framework, or mitigated by changes to the Trade and Cooperation Agreement.
Keywords
Subjects
- International Economics
- Labor and Demographic Economics
- Public Economics and Policy