Counting Brexit Costs: UK to ‚Pay Its Price‘ for Leaving EU

Written by | Monday, February 15th, 2021

The United Kingdom left the European Union on 31 January 2020 under the terms of a negotiated divorce deal, bringing to an end 47 years of British membership of the bloc. “Brexit” represents the most important constitutional shake-up the UK has known since it joined the six-nation European Economic Community in 1973. It is also the first time the European institution has lost a member. A “transition period” keeping most pre-departure arrangements in place ended on 31 December 2020, finally bringing the transformation that has beckoned since the June 2016 referendum when the UK voted to leave the EU.
Brexit cost the UK more than £200 billion in lost economic growth by the end of 2020 — a figure that almost eclipses the total amount the UK has paid toward the EU budget over the past 47 years, according to an earlier research by Bloomberg Economics. The analysis by the economist Dan Hanson also found that the cost of the UK’s vote to leave reached £130 billion by early 2020, with a further £70 billion likely to have been added by the end of last year. It added that business uncertainty had caused the UK’s economic growth to lag behind that of other G7 countries since the 2016 vote, prompting British economy to shrink by 3% more than it might have been if the UK had not voted to leave the EU.
The UK’s exit on the terms agreed by Boris Johnson’s government will cost his country 2.25% but the EU 0.5% of GDP by end 2022, according to first official estimate by Brussels since the deal was agreed, meaning that the economic blow dealt by Brexit will be four times greater in the UK than the EU. Equivalent to lost economic output worth more than £40bn over two years, the European Commission said that although worse damage had been avoided thanks to the 11th-hour trade deal signed in December, substantial barriers to trade still remained and would come with a heavier cost for Britain. A month into the new relationship, the European Commission noted that “while the FTA improves the situation as compared to an outcome with no trade agreement between the EU and the UK, it cannot come close to matching the benefits of the trading relations provided by EU membership.”
Most mainstream economists have already forecast that Brexit will deliver a bigger hit to the UK economy than to the EU. However, the figures compiled by the commission mark the first official EU estimates made since the deal was agreed. The forecast comes as the Johnson‘s government comes under mounting pressure over delays to cross-border trade after a month of the new rules, with business groups warning that further disruption is expected as more new border checks come into force later this spring. The deal agreed between London and Brussels included maintaining zero-tariffs – taxes on the sale of goods across borders – between the UK and the EU. However, businesses have faced additional costs and delays from new paperwork, customs checks and confusion over the new system.

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