Cost of Brexit for UK: $170 Billion and Counting

EghtesadOnline: UK Prime Minister Boris Johnson wants to "unleash Britain's potential." First the economy has to catch back up with the rest of the world.

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11 January 2020

Research by Bloomberg Economics estimates that the economic cost of Brexit has already hit 130 billion pounds ($170 billion), with a further 70 billion pounds ($90 billion) set to be added by the end of this year. That is based on the damage caused by the US untethering from its Group of seven peers over the past 3 years.

The UK is finally set to leave the European Union at the end of this month after Johnson's decisive election victory. But the uncertainty since the 2016 referendum has taken a toll. Business investment in particular has been held back, and annualized economic growth has halved to 1% from 2%, according to Financial Tribune.

Dan Hanson, UK economist for Bloomberg Economics, puts the total cost of Brexit by the end of 2020 at a towering 200 billion pounds ($260 billion) as uncertainty continues to inhibit companies and consumers.

While Johnson's deal with the EU late last year removed the imminent threat of a no-deal split, he still has to negotiate new trading arrangements. That creates another potential cliff edge at the end of the year.

The government remains upbeat. Ahead of the budget in March - the first major opportunity to spell out the economic plans of the new Conservative-majority government - Chancellor of the Exchequer Sajid Javid has promised a "decade of renewal." Tax cuts and increased borrowing for investment are all on his agenda.

While growth globally has also cooled in recent years, the analysis by Bloomberg Economics shows the UK has still lagged.

As Hanson explains, there is a strong historic correlation between the UK and G-7 countries. But they have been diverging since the vote to leave the EU, with the British economy now 3% smaller than it could have been had the relationship been maintained.