The UK’s cost of living crisis is exacerbated by Brexit, which is boosting the country’s growth potential and cost workers hundreds of pounds a year in lost wages, a new study says.
The Resolution Foundation think tank and researchers from the London School of Economics said the average worker in the UK is now on track to suffer more than £ 470 in lost pay each year by 2030, given the rising cost of living compared to with the remaining vote in 2016
In a report six years after the referendum, researchers said Brexit harmed the competitiveness of UK exports on the world stage, just as companies were forced to deal with the effects of the coronavirus pandemic and Russia’s war in Ukraine, pushing inflation to historic levels.
“A less open Britain is expected to be poorer and less productive,” it said.
Official figures released on Wednesday are expected to show a new rise in inflation from 9% in April to 9.1% last month, as rising petrol prices and rising weekly store prices increase pressure on families in need. The Bank of England has warned that inflation could reach 11% by October.
As the government struggled to counter railway unions on Tuesday amid the most widespread train strikes since the 1980s, ministers were forced to defend planned increases in state pensions to reduce inflation, while ordering a reduction in inflation. the remuneration of public sector workers.
Former Conservative Chancellor Ken Clark has said Britain is in the grip of the worst economic crisis since at least 1979, telling the BBC that a recession is almost imminent. “I think we will almost certainly go into recession in the next few years,” he said. “The Bank of England had to start fighting inflation, which was allowed to spiral out of control.
Boris Johnson warned workers not to want more wage increases to prevent a “wage and price spiral” from the 1970s that led to higher inflation, in stark contrast to October last year. when the prime minister suggested that Brexit could help create a high-paying, high-productivity economy of the future.
However, a report by the Resolution Foundation and the LSE said Brexit would weigh heavily on productivity gains in the coming years by 2030, while suggesting higher import costs increase the pain for household finances.
The study predicts that labor productivity – a key indicator of economic output per hour of work – will decline by 1.3% by 2030 due to the decline in the openness of the British economy after Brexit, equivalent to a quarter loss from past increases of efficiency decade.
Ministers argue that larger wage increases for UK workers would only be sustainable if supported by productivity gains. However, with the expected decline in the efficiency of the British economy after Brexit, scientists said that inflation-adjusted pay is now set for a decline of 1.8% by 2030. He said this is equivalent to a loss of £ 472 per worker per year.
The authors of the reports include LSE academic Swati Dhingra, an outspoken Brexit critic elected by Chancellor Rishi Sunak to serve on the Bank of England’s monetary policy committee to set interest rates from August.
The report appears to undermine the government’s argument that Brexit and its plans to level the economy to boost prosperity outside London and the south-east, with researchers finding that the north-east of England will be hardest hit by leaving the EU.
With a larger industrial sector and higher exposure to the EU market, he said the region would see a 2.7% drop in output by 2030 compared to a scenario in which the UK voted to stay in the EU. in 2016
Although the report notes that exports to the EU have not been so hard hit by Brexit under the terms of Boris Johnson’s trade agreement with Brussels since early last year, he warns the UK as a whole will become less open and less competitive. .
Sign up for the daily Business Today email or follow the Guardian Business on Twitter at @BusinessDesk
Exports to the EU are expected to be 38% lower than they would be in the EU by 2030, with a further 16% decline due to the refusal of further integration with the EU during this period.
Thorsten Bell, chief executive of the Resolution Foundation, said Brexit would make recovery from the Covid pandemic and making wages more sustainable after the crisis with the cost of living more difficult.
He said: “Ten percent inflation is painful, whether you’re riding a train, traveling by train or having nothing to do with trains. It would always be difficult to cope, but it is much more for families who come against the background of 15 years of stagnant wages.
“The sustainable way out of this is stronger, productivity-driven, wage growth. Covid-19 and Brexit do not make this easier to achieve, but the United Kingdom has significant economic strengths and we urgently need a renewed economic strategy based on them.
Add Comment