What impact is Brexit having on the UK economy? - BBC News

Summary

Upon 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

• 🌟 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.
• 💭 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.
• 📉 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.
• 🔄 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.
• 🇪🇺 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.
• 📈 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.
• 💰 The value of the pound has significantly fallen against the US dollar since 2016, making imported goods more expensive and contributing to inflation.
• 📊 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.
• 🌐 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.
• 🔄 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

00:00

🇬🇧 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.

05:01

🌪️ 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.

Keywords

💡Rishi Sunak

Rishi Sunak is the individual who took office as the Prime Minister in the context of the transcript. He is a key figure in the narrative, as he aims to deliver on the promises made in the Conservatives' 2019 election manifesto, particularly focusing on building an economy that embraces the opportunities of Brexit.

💡Brexit

Brexit refers to the United Kingdom's decision to leave the European Union. It is the central topic of the video, discussing its impact on the UK's economy, trade, and sovereignty. The term is used to encompass the political, economic, and social changes that have occurred as a result of the UK's departure from the EU.

💡Economy

The economy is the core focus of the video, specifically in relation to how Brexit has affected the UK's economic performance. It refers to the complex system of production, consumption, and trade that defines a country's financial health and wealth generation.

💡Trade Deals

Trade deals are agreements between countries that govern the terms of trade, including tariffs, quotas, and other regulations. In the context of the video, trade deals are crucial as the UK seeks to establish new relationships post-Brexit, aiming to mitigate the loss of access to the European Union's single market and customs union.

💡Single Market

The Single Market is an economic area within the European Union that allows for the free movement of goods, services, capital, and people among member states. The UK's departure from the Single Market post-Brexit has significant implications for trade and economic integration with the EU.

💡Customs Union

A Customs Union is a group of countries that have agreed to apply no tariffs or quotas on goods traded among themselves, while still maintaining a common external tariff for imports from countries outside the union. The UK's exit from the EU Customs Union is a key aspect of Brexit, affecting trade relations and economic policies.

💡Sovereignty

Sovereignty refers to the full right and power of a governing body to govern itself without any interference from outside sources or bodies. In the context of Brexit, sovereignty is often cited as a reason for leaving the EU, emphasizing the UK's desire to regain control over its laws and regulations.

💡GDP

GDP, or Gross Domestic Product, is the measure of the total value of all goods and services produced over a specific time period within a country. It is a key indicator of a country's economic performance and growth.

💡Inflation

Inflation refers to the rate at which the general level of prices for goods and services is rising, leading to a decrease in the purchasing power of money. In the video, inflation is mentioned as one of the economic challenges faced by the UK, with a weaker pound contributing to increased costs of imported goods.

💡Lord Frost

Lord Frost is the individual who negotiated Brexit for the UK. In the video, he acknowledges the costs associated with leaving the Customs Union and the Single Market, but maintains that the impact is not as significant as some critics argue.

💡Global Pressures

Global pressures refer to the various international economic, political, and environmental factors that influence economies worldwide. In the context of the video, global pressures such as inflation, energy prices, and geopolitical tensions are used to explain some of the economic challenges faced by the UK, beyond the direct impacts of Brexit.

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