What impact is Brexit having on the UK economy? - BBC News
Summary
TLDRUpon taking office, Rishi Sunak faces the challenge of fulfilling the Conservative's 2019 election manifesto promise to build an economy embracing Brexit's opportunities. Despite claims that Brexit is damaging the economy, Sunak, a long-time Brexit supporter, acknowledges trade impacts but emphasizes sovereignty and control. The Office for Budget Responsibility forecasts a 4% reduction in UK GDP over 15 years due to Brexit, with trade intensity notably decreased. However, new trade agreements and the potential for economic growth remain on the table, as Sunak seeks to overcome economic challenges and deliver on the promise of Brexit's economic opportunities.
Takeaways
- π Rishi Sunak, upon taking office, pledged to fulfill the Conservative's 2019 election manifesto promises, focusing on building an economy that leverages the opportunities of Brexit.
- π Critics argue that Brexit is not contributing positively to the economy and, in fact, is causing significant damage, contrary to the promises made by its proponents.
- π In 2020, the UK under Prime Minister Boris Johnson, agreed on a trade deal with the EU that involved leaving the single market and the customs union, which has negatively impacted trade with the EU.
- π The Office for Budget Responsibility (OBR) reported a 15% reduction in trade intensity as a direct consequence of Brexit, with UK exports not recovering after the COVID-19 pandemic unlike other advanced economies.
- πͺπΊ Despite Brexit, the UK has secured 71 new trade agreements with other countries, largely based on existing EU deals, and has established completely new agreements with Japan, New Zealand, and Australia.
- π The trade deal with Australia is estimated to increase the UK's GDP by 0.08% by 2035, but there is no significant trade deal with the US yet, and business investment levels have not returned to the peak seen in 2016.
- π° The value of the pound has significantly fallen against the US dollar since 2016, making imported goods more expensive and contributing to inflation.
- π The OBR forecasts that Brexit will reduce the UK's GDP by 4% over 15 years, and the economic impacts of COVID and the war in Ukraine are also considerable factors affecting the economy.
- π Global economic pressures and energy price inflation are affecting both developed and developing economies worldwide, adding to the complexity of the UK's economic situation.
- π Lord Frost, who negotiated Brexit for the UK, acknowledges the costs of leaving the customs union and single market but emphasizes that patience is required as the political system adjusts to the significant change.
Q & A
When did Rishi Sunak take office?
-Rishi Sunak took office on Tuesday, as mentioned in the transcript.
What was a key promise in the Conservative election manifesto of 2019?
-A key promise in the Conservative election manifesto of 2019 was to build an economy that embraces the opportunities of Brexit.
What is the general opinion of those who believe Brexit is not helping the UK economy?
-Those who believe Brexit is not helping the UK economy consider it a total disaster and argue that it is doing real damage to the economy.
What was the outcome of the trade deal agreed by then Prime Minister Boris Johnson with the EU in 2020?
-The trade deal resulted in the UK leaving the single market and the Customs Union. It was seen as a deal that would allow UK companies and exporters to do more business with European partners.
According to the Office for Budget Responsibility (OBR), what has been the impact of Brexit on UK trade intensity?
-The OBR concluded there has been a 15% reduction in trade intensity as a result of Brexit.
How has the UK's trade with the European Union been affected since Brexit?
-The UK has lost a large fraction of its trade with the European Union, including high-value professional services trade, making the country poorer.
What is the current status of the UK's trade agreements with other countries since Brexit?
-There are already 71 new agreements with other countries, though most of them are direct copies of deals done when the UK was part of the EU. There are completely new deals with Japan, New Zealand, and Australia.
How is the Australia trade deal expected to impact the UK's GDP?
-The Australia trade deal is estimated to increase the UK's GDP by 0.08% by 2035.
What has been the trend of business investment in the UK since the Brexit referendum?
-Business investment peaked in 2016, the year of the Brexit referendum, and has not returned to that level since.
How has the value of the pound been affected since the Brexit referendum?
-The value of the pound has fallen considerably against the dollar since the Brexit referendum, making imported goods more expensive and contributing to inflation.
What is the OBR's forecast for the long-term impact of Brexit on UK GDP?
-The OBR forecasts that Brexit will reduce the UK GDP by 4% over 15 years.
What does Lord Frost suggest is required for the UK to realize the opportunities of Brexit?
-Lord Frost suggests that patience is required as the whole British political system is going through a convulsion after Brexit, and the impact of such a huge change has some way to play out yet.
Outlines
π¬π§ Brexit's Economic Impact
This paragraph discusses the economic consequences of Brexit, highlighting the promises made by Rishi Sunak and the reality of the situation. It mentions the decrease in trade with the European Union, the reduction in trade intensity, and the failure of UK exports to recover post-COVID, contrasting with other advanced economies. The paragraph also references the Office for Budget Responsibility's data showing a decline in trade and the estimated loss to the UK's GDP. Furthermore, it touches on the new trade agreements with countries like Japan, New Zealand, and Australia, and their potential impact on GDP growth. The value of the pound is also discussed, with its significant devaluation since 2016 affecting import costs and contributing to inflation. The paragraph concludes with the forecasted long-term reduction in UK GDP due to Brexit and the broader economic challenges faced by the country.
πͺοΈ Navigating Post-Brexit Challenges
The second paragraph focuses on the political and economic turbulence following Brexit and the role of Rishi Sunak as the new prime minister in addressing these challenges. It acknowledges the complexity of the situation and the need for patience in realizing the economic opportunities promised by Brexit advocates. The paragraph emphasizes that while Brexit is a significant factor in the current economic landscape, it is not the sole reason for the UK's economic struggles, considering long-standing issues such as slowed growth since the 1970s and post-2008 productivity stagnation. It also notes the impact of global pressures, like inflation and energy price increases, as well as the specific economic effects of the COVID pandemic and the war in Ukraine. The paragraph concludes by reiterating the need for a strategic and patient approach to leveraging Brexit for economic growth under Sunak's leadership.
Mindmap
Keywords
π‘Rishi Sunak
π‘Brexit
π‘Economy
π‘Trade Deals
π‘Single Market
π‘Customs Union
π‘Sovereignty
π‘GDP
π‘Inflation
π‘Lord Frost
π‘Global Pressures
Highlights
Rishi Sunak takes office with a commitment to deliver on the Conservative's 2019 election manifesto promises.
A key promise is to build an economy that embraces the opportunities of Brexit.
Critics argue that Brexit is not helping the economy and label it a total disaster.
Boris Johnson's trade deal with the EU, which included leaving the single market and customs union, has not yet resulted in increased business with Europe.
The UK has experienced a significant loss in trade with the European Union, particularly in high-value professional services.
The Office for Budget Responsibility (OBR) reports a 15% reduction in trade intensity due to Brexit.
UK exports have not rebounded after the COVID-19 pandemic, unlike other advanced economies.
Rishi Sunak, a long-time supporter of Brexit, acknowledges that changes in trading relationships impact trade flows.
Lord Frost, Brexit negotiator, admits leaving the customs union and single market has a cost but believes in the broader benefits of sovereignty.
Brexit supporters like Michael Gove initially claimed the UK would be in a stronger economic position after leaving the EU.
The UK has established 71 new trade agreements with other countries, with some completely new deals significantly impacting GDP growth.
Business investment levels, which peaked in 2016, have not returned to their previous high.
The value of the pound has fallen considerably against the dollar since 2016, contributing to inflation.
The OBR forecasts a 4% reduction in UK GDP over 15 years due to Brexit.
Ministers point to global pressures such as inflation and energy prices as affecting the economy, alongside Brexit.
The UK faces long-term economic issues including slowed growth since the 1970s and stagnant productivity since 2008.
Brexit is considered by the OBR and many economists as a contributing factor to the complicated economic picture.
Lord Frost calls for patience as the British political system adjusts to the aftermath of Brexit.
Rishi Sunak, as the new prime minister, has the opportunity to deliver the economic opportunities of Brexit as promised.
Transcripts
as he took office on Tuesday Rishi sunak
turned the conservatives election
Manifesto of 2019.
I will deliver
on its promise building an economy that
Embraces the opportunities of brexit Mr
sunac wants to build the economy but
there's no shortage of people who say
that brexit isn't helping to do that
brexit is and was and will be a total
disaster brexit is doing the economy
real damage exit has negotiated is
frankly a disaster Rishi sunak wouldn't
agree that brexit's a disaster and
however it's described based on
available evidence this is what we know
about brexit and the economy
in 2020 then prime minister Boris
Johnson agreed a trade deal with the EU
in which the UK left the single market
and the Customs Union Mr Johnson saw it
as the deal which will if anything allow
our companies and our exporters to do
even more business with our European
friends that's not happened yet this is
the non-partisan institute for fiscal
studies we've lost a large fraction of
our trade with the European Union
including with high value professional
Professional Services trade that's
making us poorer or there's the UK's
trade as a whole the office for Budget
responsibility is the official body that
provides independent economic analysis
it's concluded there's been a 15
reduction in trade intensity as a result
of brexit it also released this data the
red line shows UK exports unlike other
advanced economies the UK's exports
haven't bounced back after kovid the obr
links this to brexit now Rishi sunax a
longtime supporter of brexit as this
campaign video released in the summer
was Keen to emphasize
so there you have it grishy soon now
a real brexiteer from day one
and months earlier when still Chancellor
Mr sunac was asked about the drop-in
tray it was always inevitable that if
you change the exact nature of your
trading relationship with the EU that
was going to have an impact on trade
flows this week in a different way this
point was acknowledged by the man who
negotiated brexit for the UK Lord Frost
I've always said leaving the Customs
Union and the single Market has a cost
not every brex tier has been willing to
to say that but I have always said it I
don't think it's as big as many people
say now Lord Frost and many brexiteers
would say that brexit is about much more
than the economy it was about
sovereignty about taking back control
but the economy was part of it this is
Michael Gove in 2016. the truth is that
if we vote to leave we'll be in an
economically stronger position that also
hasn't happened yet now no doubt
resetting your trading relationship with
the world takes time there are already
71 new agreements with other countries
though most of them are direct copies of
deals done when the UK was part of the
EU there are completely new deals with
Japan New Zealand and Australia the
Australia deal for example is estimated
to increase the UK's GDP by
0.08 by 2035.
then there's India the government said
this week progress is being made but
there's no sign of a deal with the U.S
and if that's trade next is business
investment it peaked in 2016 the year of
the brexit referendum it's never
returned to that level or there's the
value of the pound the strength of the
dollar has lowered the value of
currencies around the world but the
pound has fallen considerably against
the dollar since 2016 and a weaker pound
makes imported goods more expensive
which in turn has contributed to
inflation put all of these factors
together and this is the office for
Budget responsibilities conclusion it
forecasts that brexit will reduce UK GDP
by four percent over 15 years and when
faced with questions about the economy
ministers have pointed to international
issues these are Global pressures these
inflationary pressures these energy
price pressures are affecting economies
developed and developing economies right
across the globe no doubt the economic
impacts of kovid and the war in Ukraine
are considerable the UK's economy has
longer term issues too since the 1970s
growth has gradually slowed and since
the global crash of 2008 productivity
has stagnated it's a complicated picture
but the obr and many economists argue
brexit is part of it Fierce part Lord
Frost says patience is required I think
the whole British policy political
system is going through a bit of a
convulsion after brexit it's not
surprising when you get these this sort
of
huge change and I think it's got some
way to play out yet and as it plays out
with the new prime minister in charge
Rishi sunak has the chance to deliver
the economic opportunities of brexit
that he's long promised but based on
available evidence brexit in its current
form is one of the things constraining
the growth of the UK's economy
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