LONODN (Market Watch) - The UK economy is now 5% worse off than it would have been had it never left the European Union due to a slump in trade and investment since the Brexit referendum in June 2016, according to a new study by Goldman Sachs.
This slowdown has seen the UK’s GDP per capita stagnate since COVID-19, having increased just 4% since the 2016 referendum, compared to an 8% increase in the eurozone and a 15% increase in the U.S., said a team at Goldman led by chief European economist Sven Jari Stehn.
At the same time, the UK has experienced much higher inflation than in rival advanced economies, with the country’s consumer prices up by 31% since 2016, versus rises of 27% in the U.S. and 24% in the eurozone.
Goldman Sachs’ study compared the UK’s post-Brexit economy to a hypothetical model of one that never left the EU, with that underperformance blamed on the trade drop, lowered investment and labor market impacts of the decision to leave the EU.
UK trade volumes –- total imports and exports –- are roughly 15% lower than in comparable countries, due to higher trade barriers with the EU and the resulting shift in supply chains.
Britain’s exports of goods to both the EU and the rest of the world have fallen sharply since Brexit, even as its services exports, which account for 40% of the country’s total exports, have remained roughly on course, the report said.
Investment in the UK has also stalled since Brexit, as a result of uncertainty in the years immediately following the referendum alongside a pullback by hard hit companies. Overall investment is 5% lower than if Britain had never left the EU.