The impact of Brexit on the UK economy will be worse in the long term than the coronavirus pandemic, said the chairman of the Office of Fiscal Responsibility.
Richard Hughes said exiting the EU will reduce the UK’s potential GDP by around 4% in the long run.
He said forecasts showed the pandemic would reduce GDP “by an additional 2%”.
“In the long run, Brexit is likely to have a greater impact than the pandemic,” he told the BBC.
His comments come after the OBR said the cost of living could rise at its fastest rate in 30 years, with hints that inflation could reach nearly 5%.
Speaking after Wednesday’s budget, Hughes said recent data showed that the impact of Brexit is “broadly consistent” with the OBR’s assumption that exiting the EU “will reduce our long-term GDP by about 4% “.
“We believe the effect of the pandemic will reduce that production (GDP) by an additional 2%,” he added.
The Treasury has been contacted for comment.
- What is GDP and how is it measured?
GDP or gross domestic product is one of the most important ways to show how good or bad an economy is doing. It is a measure – or an attempt to measure – all the activity of companies, governments and individuals in an economy.
In a growing economy, quarterly GDP will be slightly higher than the previous quarter, a sign that people are working harder and getting (on average) a little richer. If GDP is falling, then the economy is shrinking.
The UK voted to leave the EU in 2016 and officially left the trade bloc on January 31, 2020, however, both sides agreed to keep many things unchanged until December 31, 2020, before a new trade deal was announced. and implemented on January 1 of this year.
Flexible chain problems
Both the pandemic and Brexit have played a role in current supply chain problems across the UK and have further exposed the shortage of truck drivers, which has led to recent shortages of products for companies and some empty shelves for customers.
However, in the latest report from the OBR, the independent body said that “bottlenecks in procurement have been exacerbated by changes in post-Brexit migration and trade regimes.”
Supply chain issues have led the government to grant short-term visas to EU workers in certain sectors, including the transport sector.
The British Poultry Council said turkey farmers will do their best to ensure Christmas “is as normal as possible,” but shortages are likely to be felt, due to a shortage of seasonal workers overseas.
The government has assured consumers that the turkeys will be available for the holiday season and has also distributed temporary visas in an effort to bolster the number of workers.
- Economic growth
- Budget 2021
- Budgetary Responsibility Office
- Coronavirus pandemic
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