The cost-of-living crisis in the UK is worsening as Brexit drags the country’s growth potential and costs workers hundreds of pounds a year in lost wages, according to new research.
The Resolution Foundation think tank and academics at the London School of Economics said the average worker in Britain was now on the verge of suffering more than £ 470 of lost pay each year in 2030 after having take into account the increase in living costs, compared to a permanent vote in 2016.
In a report six years after the referendum, researchers said Brexit was hurting the competitiveness of UK exports on the world stage in the same way that companies are being forced to deal with the aftermath of the pandemic. of coronavirus and the Russian war in Ukraine that brings inflation to historic levels.
“A less open Britain is expected to be poorer and less productive,” he said.
Official figures forecast for Wednesday show a further rise in the inflation rate from 9% in April to 9.1% last month, as rising petrol prices and rising costs of a weekly store increase the pressure on troubled families. The Bank of England has warned that the inflation rate could reach 11% in October.
When the government tried to confront the railway unions on Tuesday in the midst of the most widespread train strikes since the 1980s, ministers were forced to defend the anti-inflation increases planned for the state pension while ordering wage moderation. public sector workers.
Former Conservative Chancellor Ken Clarke said Britain was suffering the worst economic crisis since at least 1979, and told the BBC that a recession was almost inevitable. “I think we will almost certainly go into recession in the next two years,” he said. “The Bank of England has had to start dealing with inflation, which has been allowed to go out of control.”
Boris Johnson has warned workers not to demand larger wage increases to prevent a 1970s-style “wage-price spiral” from driving higher inflation, in stark contrast to October last year, when the prime minister suggested that Brexit could help create a high, high wage. productive economy of the future.
However, the Resolution Foundation and LSE report said that Brexit would greatly affect productivity gains over the next few years until 2030, while suggesting that higher import costs would be exacerbated by homes.
The research estimated that labor productivity, a key measure of economic output per hour worked, would fall by 1.3% by 2030 due to a decline in the opening of the British economy after Brexit, equivalent to losing a quarter of the efficiency gains achieved over the past. decade.
Ministers have argued that the largest wage increases for UK workers would only be sustainable if they were supported by productivity gains. However, with the expected fall in the efficiency of the British economy after Brexit, academics said that now the inflation-adjusted wage had been set at a fall of 1.8% by 2030. He said this amounted to a loss of £ 472 per worker, per year. .
The authors of the reports included LSE academic Swati Dhingra, an open Brexit critic chosen by Chancellor Rishi Sunak, to serve on the Bank of England’s monetary policy committee from August.
The report seemed to undermine the government’s argument that Brexit and its plans to level the economy to boost prosperity outside London and the South East, and researchers found that the North East of England would be the most affected when leaving the EU.
With a larger industrial sector and greater exposure to the EU market, he said the region will see a 2.7% drop in manufacturing output by 2030 compared to a scenario in which the UK voted to remain in the EU in 2016.
Although the report found that exports to the EU had not been so affected by Brexit under the terms of Boris Johnson’s trade agreement with Brussels since the beginning of last year, it warned that, in overall, the UK would become less open and less competitive.
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Exports to the EU are expected to be 38% lower than they would have been within the EU by 2030, down more than 16% due to a lack of EU integration during this period.
Torsten Bell, CEO of the Resolution Foundation, said Brexit would make it harder to recover from the Covid pandemic and get wages to rise sustainably after the cost-of-living crisis.
He said: “Ten percent inflation is painful, whether you’re driving a train or traveling by train or having nothing to do with trains. It would always have been difficult to deal with it, but it’s much more so for to families who come with 15 years of stagnant wages.
“The sustainable way out of this is stronger productivity growth, driven by productivity. Covid-19 and Brexit are not easy to achieve, but the UK has considerable economic strengths and we urgently need a renewed economic strategy. let them suffice. “