Brexit Was Going To Ruin The Economy, But Has It?

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Written By Hasan Rezazadeh

Brexit still dominates the headlines and has driven politics at home for more than a year, but does leaving the European Union really matter?

It would seem not according to analysis by think tank Policy Exchange.

A full year has more than past since the referendum on June 24, 2016, which has allowed economists and statisticians to crunch the numbers to just how the Brexit vote has impacted the economy.

Analysts scrambled to slash economic forecasts in the wake of the vote, while doomsayers predicted a return to recession and some prophecised almost the end of life as we know it.

But the Policy Exchange points out none of this has come true and Brexit has had little or no effect on the economy.

Natural readjustment

Sterling has plunged against the US dollar, euro and most other countries, but the think tank sees this as a natural readjustment of an overinflated currency that was on the cards anyway.

What the fall in Sterling has done is restrain consumer spending and ratchet up inflation from around 2% a year ago to 2.6% now.

But inflation will slow, says the report, because wages and house prices are not overheating. This will prompt wage increases and a corresponding rise in consumer spending.

During the year, the economy expanded by 1.7%, which is likely the rate of growth when adjusted for inflation if Brexit had not happened, says Policy Exchange, while GDP hit the same figure.

Austerity bolsters the economy

“On this basis one could argue that the referendum made no difference to UK growth prospects whatsoever,” said the research.

“The economy has exceeded many commentators’ expectations in the year since the vote to leave the EU. Potential difficulties will increase as the March 2019 departure date approaches.

“The sooner clarity can be established about future trading arrangements with the EU the better. But the economy is going into this period in relatively good shape, albeit more by luck than judgement.”

Austerity budgets and higher than predicted tax takes have bolstered the economy, which is in a good state compared with a decade ago. Brexit may still hold some surprises, but at least the country is better prepared to weather the storm.