Departure from Europe has created problems and austerity has made them worseby Ann Pettifor / November 22, 2018 / Leave a comment
According to Heisenberg’s uncertainty principle there are limits to the precision with which we can be certain about the properties of a particle. “The position and the velocity of an object cannot both be measured exactly, at the same time, even in theory. The very concepts of exact position and exact velocity together, in fact, have no meaning in nature.”
As in physics so in economics. There are limits to the precision with which we can judge the impact of the interminable drama that is Waiting for Brexit. The precise “object” of Brexit is not clear, let alone its impact, or speed of impact. That said, we know it will have an impact, and this can be broadly estimated.
Let’s go to the data. The most recent real GDP stats for the UK from 2014 to 2018 (with the OBR estimate for this year) show the annual percentage rate of growth. In 2014 the figure was 2.9. In 2015, 2.3. Then 1.8, 1.7 and for this year the estimate is 1.3. Can you, Prospect readers, spot a trend? The referendum took place in the middle of the period and the result—it would seem—served to reinforce the already slowing rate of the economy.
Our main EU comparator economies were expanding over this period, as they slowly recovered from the harsh impact of the eurozone crisis. Then very recently, that recovery began to reverse. The US is on a different journey, pumped up by the Trump tax-cut stimulus. If we put together percentage change data for France, Germany, Italy and the US, with the latest UK data for the third quarter of 2018 (change over Q3 2017) we get the following trajectories. France’s GDP expanded by 1 per cent in 2014, but rose steadily to 2.2 per cent in 2017. Germany maintained a steady 2.2 per cent growth rate, as did the US. Italy expanded by just 0.1 per cent in 2014, but improved steadily to 1.6 per cent in 2017. The UK by contrast declined from 2.9 per cent in 2014 to 1.8 per cent in 2016, and then fell further in 2017 to 1.7 per cent and we may reasonably assume that this carried into 2018. This would make a combined effect, for the two years, of around £30bn lost output. It…