The British economy will take “many years” to fully adjust to the fallout from Brexit, which will weigh on household purchasing power in the long run, a report from the economic think tank Resolution Foundation warned on Wednesday.
The publication of this new study took place on the same day that the British statistical institute, the ONS, announced a new historical rise in inflation that fuels a serious crisis in the cost of living in the United Kingdom.
The trade agreement that governs relations with the European Union after Brexit will have the general effect of “reducing household income”, weighed down by “the weakness of the pound and the fall in investment and trade,” says the study .
“Immediately after the referendum (2016, ndlr), Brexit contributed to an increase in the cost of living and a drop in business investment,” recalls the Resolution Foundation.
And over the next decade, the country “will have 1.3% lower productivity” than in a scenario without Brexit, while wages in real terms, that is, adjusted for the effects of inflation, “will fall in £470 per person per year,” or about $575 at current exchange rates.
Since the entry into force, effective on January 1, 2021, of Brexit, “the greatest change in the United Kingdom’s relationship with the rest of the world in almost half a century”, the exit from the EU “seems to be weighing on the opening and competitiveness” of the British economy in general, says the study.
But while the UK has seen the share of its imports coming from the EU fall, the country has maintained the share of exports it sends to its mainland neighbour.
British companies have had to adapt: ”because of the extra red tape” companies sometimes choose to “ship directly to a single EU country and use distributors in the Union, rather than export directly to smaller markets”.
“Trade barriers should increase more in agriculture and services – and in particular in the more regulated professional services – than in manufacturing,” the think tank predicts.
This is bad news for UK exports as 20% of our services exports to the EU fall into the highly regulated category of finance and insurance.