Why the Centre for European Reform is wrong about Brexit - 25.06.22

by Dr Graham Gudgin for Briefings for Britain


This article first published by Policy Exchange argues that attempts to assess the impact of Brexit by comparing the UK with benchmark ‘doppleganger’ economies does not work. A more straightforward comparison with G7 countries suggests that no Brexit-induced loss of output has occurred.


The Centre for European Reform has published a series of articles in recent years estimating the impact of Brexit on GDP, trade and investment. These use a so-called doppelgänger methodology which selects a group of countries which had a similar economic performance to the UK prior to Brexit and then compares their post-Brexit performance with that of the UK.


The most recent of these ‘What can we know about the cost of Brexit so far?’ was published on 9 June 2022. It estimated the impact of Brexit on the UK economy as a 5.2% reduction in GDP, a 13.7% fall in investment, and 13.6% fall in trade compared to a “modelled ‘doppelgänger’ UK that did not leave the EU”.


It was given major and uncritical coverage in the ITN television news bulletin the following day with its conclusion that Brexit had already had a major negative impact on the UK economy repeated as though it were a fact. The results have been frequently cited by other media outlets and commentators in a similar way, including the Economist magazine.


Summary


Analysis by Policy Exchange shows that the CER research has failed in its effort to prove that Brexit has hit the UK’s economic performance and its doppelgänger methodology is fatally flawed.


– The research uses different sets of comparator countries for different variables (and different to its previous report) rather than conducting a comparison with a consistent set of countries.


– It assumes that any divergence between the UK and comparators is due to Brexit, whereas self-evidently it could and probably does come from a wide range of other reasons, notably the cyclical position of different countries at different times.


– Crucially, the massive disruption caused to all economies by the Covid pandemic, and differences in measurement methodology between the UK and many other countries, mean that conclusions based on the pandemic years — nearly half of the CER’s base period — cannot be plausibly substantiated.


A more plausible comparison, between the UK and the other G7 countries, shows no visible impact from Brexit at all. GDP in current prices in the UK fell a little behind the G6 in 2018 but then recovered by 2019. The Covid-induced decline in 2020 was a little deeper than the G6 and, as expected from its earlier ending of lockdowns, the UK’s recovery has been a little faster.


It will take many years to disentangle the effect of Brexit from all the other influences on the UK economy over these years. It can’t be short-circuited by creating an implausible and flawed methodology to draw premature conclusions.


For the full article in pdf with charts, please click here:

Why the Centre for European Reform is wrong about Brexit - by Graham Gudgin for Briefings
.
Download • 543KB

https://www.briefingsforbritain.co.uk/why-the-centre-for-european-reform-is-wrong-about-brexit/


Dr. Graham Gudgin is Chief Economic Adviser to Policy Exchange. He is currently Honorary Research Associate at the Centre for Business Research (CBR) in the Judge Business School at the University of Cambridge.



35 views0 comments