The UK economy has suffered a “significant long-run output cost” from Brexit, new analysis from Goldman Sachs shows.
Goldman have looked into the economic costs of Brexit, both structural and cyclical, and found that UK real GDP has fallen short of similar countries by about 5% since the 2016 referendum.
To find this, they conducted a “Doppelgänger” analysis – using statistical techniques to find the best combination of other countries that match the path of UK real GDP before the referendum and using this same combination to project what might have happened thereafter, had the UK remained in the EU.
The problem with this Doppelgänger approach is that the UK economy may have been worse hit by the pandemic and the energy crisis than other countries.
But still, Goldman say the UK has suffered from higher trade costs, lower business investment, and a fall in immigration from the EU.
They say:
First, we show that UK goods trade has underperformed other advanced economies by around 15% since the referendum.
Second, business investment has been weak since 2016, falling notably short of the pre-referendum trend.
Third, immigration from the EU has dropped sharply but non-EU immigration has risen significantly, although the recent increase has been skewed towards students with lower participation rates.
Goldman adds that while overall immigration has been higher than expected – it hit a record in 2022 – there has been an increase in overseas students coming to study, rather than EU immigrants coming to work.
