274. Would rejoining the EU be the best growth strategy?
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How much did Brexit cost the UK?
That battle bus claiming more money for the NHS, that was completely wrong. Look, if you told the British electorate, hey, you know what, you can vote for Brexit, you know, it's going to cost you £2,000 a year, but you want less immigrants and you want, yeah, I don't know, cheaper housing because there's less people around, you can have it. The problem is that was never what was promised. There was promised more spending on the NHS, which has basically turned out to be an absolute lie.
I mean, my rough and ready calculation is on a three trillion pound economy, we're looking at 240 billion of income that has disappeared. Is that right?
This is an enormous loss of money.
Hello and welcome to The Rest Is Money with me, Robert Paston. I think Steph McGovern's off solving crime again or whatever she does in her spare time. But I'm thrilled that I'm joined by the distinguished Stanford economics professor, Nick Bloom.
What is the 8% GDP loss associated with leaving the EU?
Nick, very good to see you. And I think most of what we'll talk about today is the report that you did on the costs of Brexit, which... pleased some people and infuriated others. Um, and I was quite struck. I don't know if you regarded this as a badge of honor or, um, something, uh, that you'd rather not have happened, but I noticed that the chancellor has taken to referring to your, uh, assessment that leaving the EU has led to an 8% reduction in, uh, GDP, uh, an 8% loss in national income. It's been quite striking in the sort of political sphere that she's started, in a sense, essentially giving you this great accolade of official approval at a time when they're very, very keen to persuade the British people that we need to move economically and actually diplomatically closer to the
to the EU. So it's an important number, that 8%. I think it's roughly double the estimate that the Office for Budget Responsibility, the only sort of official work the Office for Budget Responsibility has done on this, I think said the loss was about 4%.
What methods did the guest use to assess Brexit's economic impact?
I'm really fascinated just to start with, because you use two different methods, and actually your assessment is the loss is somewhere between 6% and 8%. But talk me through... how you set about approaching this assessment and how you came up with that number.
Yeah, so basically there's a top-down and a bottom-up approach. So the top-down is to compare the UK to the EU 27, so 27 countries in the EU, plus six others, so US, Canada, Japan, Iceland, Norway, and I can't remember, but there's 33 countries in total. And what we do is we show quite clearly that if you compare the UK to those 33 other countries, it tracks very closely on GDP for 10 years running up to the Brexit vote. So you do the average of the other 33. You do the UK and those two lines line almost on top of each other. Then the Brexit vote happens in 2016, and the UK line starts to slow down. And you can see this gap opening up.
How does Brexit impact the UK's economic growth compared to the EU?
And that gap opens up year by year. So 10 years later, by 2026, the UK is about 8% below the average of all the other 33 countries. And that gap, interestingly enough, it doesn't all open in 2016. So the vote doesn't actually do much at the time. It's this kind of death by a thousand cuts. So that's one of the big reasons we differ from the OBR is their numbers are a bit out of date now. And so some of the damage of Brexit accrued in 21, 22, 23. And so by 2026, it's about 8% on the macro data.
Just also talk me through the other approach that you took, because you didn't just do the top down. Tell us about the bottom up.
What are the potential benefits of rejoining the EU?
Yes, exactly.
So the bottom up was actually much more work. So the bottom up with something called the decision maker panel we actually created in 2016. We've been surveying about 5000 British firms on a very regular basis. for the last 10 years, and we know how exposed they are to the European Union. So, you know, their sales, their, you know, to the EU, their imports from the EU, their regulatory coverage, how many EU migrants they have, are they EU owned, etc. And so what you can do is you can compare EU exposed firms to non-EU exposed firms and look at the impact on growth.
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Chapters
8 chapters
1
How much did Brexit cost the UK?
0:01–1:02
2
What is the 8% GDP loss associated with leaving the EU?
1:02–2:24
3
What methods did the guest use to assess Brexit's economic impact?
2:24–3:25
4
How does Brexit impact the UK's economic growth compared to the EU?
3:25–4:03
5
What are the potential benefits of rejoining the EU?
4:03–4:57
6
How could a more orderly Brexit have changed the outcome?
4:57–5:49
7
What challenges does the UK face in negotiating with the EU?
5:49–6:23
8
What does the future hold for the UK's relationship with the EU?
6:23–41:23
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