Texas Border Business
About 10 years ago, voters in the United Kingdom (UK) voted to leave the European Union (EU). Key issues in the decision included a desire for more control and autonomy, with less immigration without the EU’s policy of free movement. Proponents thought the UK would not only save billions of pounds in EU membership fees but would also be able to negotiate better trade deals without the EU bureaucracy. After heated debate, the referendum narrowly passed with 52% of voters choosing to leave.
At the time, I wrote that “economic fallout of the decision will likely be decidedly negative for the UK.” Shortly, thereafter, I added that “As the shock waves began to be felt throughout the UK, it became apparent that many already have “buyer’s remorse” and had absolutely no idea the effects that their votes would have and now wish they had selected to ‘Bremain’.”
Foregoing the benefits of the free flow of goods and services as well as workers was difficult to overcome, in addition to other considerations. Ten years later, the data clearly indicates that Brexit has indeed severely harmed the UK economy.
A recent study by the Stanford Institute for Economic Policy Research found that, by 2025, Brexit had reduced UK Gross Domestic Product by 6% to 8%, with investment reduced by 12% and 18%, employment by 3% to 4%, and productivity by 3% to 4% from what it would have been otherwise. It is noteworthy that, given the time required for implementation, the split didn’t formally occur until December 2020, and the gap between economic growth and what might have been will almost certainly continue to widen.
Clearly, other factors have affected the rate of expansion of the UK economy since Brexit. From the pandemic and its aftermath to energy and fiscal policy, the challenges have been significant. However, leaving the EU alone has been a significant and quantifiable factor due to the uncertainty and disruptions that it caused.
There is some parallel to tariff and trade policies which the United States has been implementing in the past few years. The UK removed itself from a large and powerful trading bloc, much as the US has withdrawn from trade agreements and implemented tariff barriers. The US has also reduced immigration, another similarity to Brexit.
Global economies face myriad challenges including wars (and related energy issues) and demographic shifts. Adding unnecessary difficulties by restricting trade and the flow of capital and labor by ‘Brexiting’ was an unfortunate choice with long-term implications for growth. The EU wasn’t perfect for the UK—no such situation can be—but going it alone has curbed prosperity to a measurable extent. The US should take heed! Stay safe!
_______________
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of more than 3,000 clients over the past four decades.
