Abstract
The UK’s decision to leave the European Union will have a wide-ranging effect on the British economy, but the scale and sequencing of the likely effects are hard to gauge. The uncertainties surrounding how a country separates itself from a regional economic bloc have posed challenges to the economics profession about how best to analyse the many consequences. The paper discusses the main lines of relevant economic argumentation, and reviews the evidence from studies of the likely effects of “Brexit”. It then considers how the UK’s economic linkages with the EU might evolve and examines some of the ensuing political economy challenges. The concluding section ponders the role of economists in so contentious a political development.
Highlights
Economic disintegration is a rare phenomenon, and there is scarcely any basis for assessing the separation from a regional economic bloc, such as the European Union (EU), on which the United Kingdom (UK) is about to embark
The evidence (Crafts 2016) suggests UK economic performance, loosely defined, benefitted from EU membership, it need not follow that being outside the EU will cause a reversion to harmful old ways
The outcomes for gross domestic product (GDP) and jobs, as projected by HM Treasury, were that the Norway model would be least damaging, the Canadian model more so, but less than the World Trade Organisation (WTO) model. Among those contributing to the analyses, the range of estimates is large, from a loss of GDP of nearly ten percentage points (in the least attractive trade and inward investment scenarios modelled by HM Treasury (2016a; Ebell and Warren 2016; and Centre for Economic Performance (CEP) 2016) to the gain of four points estimated by Minford et al (2016), a clear outlier
Summary
Economic disintegration is a rare phenomenon, and there is scarcely any basis for assessing the separation from a regional economic bloc, such as the European Union (EU), on which the United Kingdom (UK) is about to embark. The secession of the United Kingdom (UK) from the Union poses challenges to economists and the analytical tools of the profession. These challenges are accentuated by the political ramifications of the Brexit decision and the role in it of expert analysis. The unexpected outcome of the general election has accentuated uncertainty, not just about how the UK will reconfigure its relationship with the EU, and has renewed concerns about the economic impact. As for the pollsters who misread voting intentions in both the referendum and the 2015 and 2017 UK general elections, their credibility as contributors to political debate is under challenge. The following sections discuss the UK’s trade linkages and the political economy of Brexit.
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