Money

Brexit costs UK £600m per week, says Goldman study


Brexit has cost the UK around £600m every week since the 2016 referendum, according to a report by Goldman Sachs that highlights the economic impact of the uncertainty surrounding Britain’s exit from the EU.

The investment bank said that Brexit has cost Britain about 2.4 per cent of gross domestic product, compared with a hypothetical “Doppelgänger” economy that did not withstand a Brexit shock. Its estimates suggest that the UK economy has underperformed other advanced economies since mid-2016 as a result.

Sven Jari Stehn, Goldman economist in London, said the “output losses have been concentrated in investment and private consumption”.

“The outsized impact on investment suggests that political uncertainty associated with the Brexit process may, indeed, be one of the major sources of the economic cost of Brexit,” he said.

Goldman’s analysis comes after government plans to exit the EU have been repeatedly knocked back by parliament, increasing the uncertainty over the path of Brexit with the original divorce date of March 29 now pushed back to mid-April.

Theresa May’s government has attempted three times to pass a Brexit pact negotiated with Brussels, but has failed to garner sufficient support among MPs. A set of “indicative votes” last week, meant to gauge parliament’s preferred route for Brexit, did not reveal majority support for any single proposal.

The investment bank noted that Brexit uncertainty has also affected other major economies, particularly those with close trade ties to the UK.

“We find that the drag from weaker UK growth has been felt most strongly in countries with larger export exposure to the UK such as Germany and France,” said Mr Jari Stehn.

He added: “The global confidence shock, on the other hand, had the largest impact on Italy and pain — on account of the pronounced sell-off in risk assets. The effects of the global confidence shocks have also reached further afield, with Japan, the US and Canada experiencing a GDP drag.”

Goldman said that a “status quo Brexit transition deal” could reverse part of the UK’s underperformance, while, if the UK remained in the UK, Brexit-related output costs could be fully recouped and business confidence rebound.

“Both would provide a meaningful boost, mainly to the UK economy,” it said. “Under our ‘no deal’ scenario, the UK suffers large output losses, in conjunction with a substantial global confidence shock marked by a sharp sterling depreciation.”



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