Is Brexit ‘certainty’ going to boost the UK economy?
One of the things I expect in the first few months of this year is an acceleration of private investments in the UK that should boost GDP growth. The simple reason for this is that after the general election there is at least the certainty that the UK will leave the EU on 31 January. Of course, the bounce should be short-lived since the terms of the relationship after the transition period are unknown an given the Tory majority in parliament there is an increased likelihood of a WTO style deal if the major obstacles to a trade deal cannot be removed in 2020.
But it seems as if my assessment of a short-term boost to the UK economy is significantly more optimistic than the assessment of 43 US and 47 European economists, several of which have won a Nobel Prize. For two years now the University of Chicago asks its IGM expert panel several times a month on current economic topics. In December they asked about the likelihood of a short-term boost to the UK economy given the reduced uncertainty on Brexit. The chart below shows the responses of the experts weighted by their confidence in the outcome. Both in the US and in Europe, 72% of economists are either uncertain about a short-term boost for the UK economy or disagree with the expectation of a short-term boost. Only one in five economists agree or strongly agree that there is going to be a boost. So, despite being German, I have somehow ended up amongst the 20% most optimistic people on short-term UK growth – a rather unusual position for me to be in.
Is reduced Brexit uncertainty going to give the UK economy a short-term boost
Source: IGM Forum
However, I am well within the range of consensus opinion when it comes to the risk of a hard Brexit. The IGM Forum asked only the European economists in their panel whether there still is a considerable risk of a hard Brexit at the end of 2020. Four out of five economists think that this is true and only a small minority think that the general election reduced the risk of a hard Brexit.
Risk of a hard Brexit is still considerable
Source: IGM Forum
That a hard Brexit and a return to WTO rules in the trade between the UK and the EU would be bad for the UK economy is common sense. 91% of respondents (when weighted by confidence in their responses) agree that a hard Brexit would have a large negative effect on the UK economy. But strangely, even in this question, one can apparently find one guy who thinks that this is not true. And I bet you a lot of money that this guy will be paraded in the conservative press in Britain for the entire year to show that there is “no consensus” on the impact of a hard Brexit. But given the chart below, it is impossible to call the views of economists on hard Brexit anything else than n overwhelming consensus.
Leaving the EU without a trade agreement would severely impair the UK economy
Source: IGM Forum