According to a study conducted by a senior Bank of England official, the UK has lost £29 billion in business investment since the 2016 Brexit referendum, or £1,000 per household.
According to Jonathan Haskel, an external member of the Bank of England’s nine-member monetary policy committee, which sets UK interest rates, private sector investment “stalled” in the years following the decision to leave the EU.
He claimed that in the aftermath of the referendum, the UK fell behind the six-year trend and “suffered much more” than other major industrialized economies, resulting in a productivity gap that has left permanent scars.
The study by Haskel and his colleagues is likely to fuel fears that the Brexit vote and former Prime Minister Boris Johnson’s strategy to exit the EU single market and customs union have done irreparable harm to the UK economy.
The difference between current business investment levels and the trajectory before 2016, GDP would be 2.8% around the end of the forecast period in 2026. It is very close to the 3.2% number we found using the different methodologies based on goods trade volumes, Haskel said.
“Imagine if the business investment had not flattened out after the 2016 referendum and instead increased as a real investment did in pretty much every other country,” he told the web newsletter in an interview.
Haskel explained, “One finds that the current productivity penalty is about 1.3% of GDP. It is equivalent to £29 billion, or approximately £1,000 per household forecast period, and the penalty rises to around 2.8% of GDP.”