BREXIT has damaged Britain’s competitiveness and will make it poorer

Brexit has not had the expected effect of narrowly reducing exports to the EU but has instead more broadly reduced how open and competitive Britain’s economy is, which will reduce productivity and wages in the decade ahead.

The report notes that the immediate impact of the referendum result has been clear, with a depreciation-driven inflation spike increasing the cost of living for households, and business investment falling.

Sophie Hale, Principal Economist at the Resolution Foundation, said: “Brexit represents the biggest change to Britain’s economic relationship with the rest of the world in half a century.”

“This has led many to predict that it would cause a particularly big fall in exports to the EU, and fundamentally reshape Britain’s economy towards more manufacturing.”

“The first of these has not come to pass, and the second looks unlikely to do so.”

“Instead, Brexit has had a more diffuse impact by reducing the UK’s competitiveness and openness to trade with a wider range of countries. This will ultimately reduce productivity, and workers’ real wages too.”

“Some sectors – including fisheries –still face significant change to come in the years ahead. But the overall services-led nature of the UK economy will remain largely unaffected.”

“Some manufacturing sectors, such as food manufacturing, will grow but others will shrink, including advanced manufacturing. The latter are generally higher productivity, and pay higher wages, than the former, showing how a less open economy feeds through into household living standards.”