New Times,
New Thinking.

  1. Business
  2. Economics
29 October 2018updated 17 Jan 2024 6:10am

Budget 2018: The OBR shows how Brexit has hurt the UK economy

The Office for Budget Responsibility warns that the economy is 2 to 2½ per cent smaller as a result of the Leave vote. 

By George Eaton

After each Budget, it’s no longer the famed “red book” that I turn to first but the Office for Budget Responsibility’s Economic and Fiscal Outlook. Ever since its creation in 2010, the government’s fiscal watchdog has been highlighting inconvenient truths for ministers.

Only five months before the UK is due to leave the EU, this year’s OBR document is most notable for its warnings over the cost of Brexit. “Notwithstanding potential future revisions, the referendum vote to leave the EU appears to have weakened the economy,” the OBR states on p.8.

It explains: “The fall in the pound has squeezed real household incomes and consumption, while providing only a modest boost to net trade. Meanwhile, uncertainty regarding the Brexit negotiations appears to have dampened business investment (by more than earlier data suggested).

“Studies that construct a pre-vote ‘doppelganger’ for the UK suggest that the economy was 2 to 2½ per cent smaller by mid-2018 than it would have been if the referendum had not been called. The average quarterly growth rate has slowed from 0.6 per cent between 2013 and 2015 to 0.4 per cent since the beginning of 2016, taking the UK from near the top of the G7 growth league table to near the bottom.”

Few economists would disagree with this – but expect Tory Brexiteers to inveigh against the independent OBR, as they did when I interviewed the organisation’s head Robert Chote earlier this year (“In terms of the net effect on GDP, the hits to demand have outweighed the boosts,” he said of the Leave vote).

Select and enter your email address Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how Progressive Media Investments may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.

Though the OBR emphasises that the uncertainty over the UK’s future arrangements means it is not possible to estimate the future cost, it does warn that “we continue to expect virtually no growth in both exports and imports for the last three years of our forecast, partly the result of an assumed reduction in trade intensity after leaving the EU”.

Even before Brexit takes place, economic growth is estimated to fall below 2 per cent in every forecast year (1.6 per cent in 2019, followed by 1.4 per cent in 2020, 1.4 per cent in 2021, 1.5 per cent in 2022 and 1.6 per cent in 2023). As grim as this may appear, Britain will be fortunate if this is the worst it has to face.

Content from our partners
An innovative approach to regional equity
ADHD in the criminal justice system: a case for change – with Takeda
The power of place in tackling climate change