Bloomberg) -- Leaving the European Union had an impact on the UK economy equivalent to the coronavirus pandemic and likely reduced output by 4%, the chairman of the Office for Budget Responsibility told the BBC.
“It’s a shock to the UK economy of the order of magnitude of the sorts of other shocks we’ve seen from the pandemic, from the energy crisis,” Richard Hughes said in an interview with the BBC. “Those have also had percentage-point impacts on the level of output in five or 10 years’ time.”
Economic growth has also been held back by declining productivity, a shrinking workforce, and stagnant investment, which has combined to constrain living standards, said Hughes, who heads the independent forecaster that monitors public spending.
The UK voted to leave the EU in 2016 and formally exited in January 2020. The departure has made it harder for some companies to find workers and more difficult for domestic manufacturers to sell into the EU, while also allowing the UK to seek trade deals independent of the EU. The UK is the only developed economy not to have recovered to pre-Covid levels of GDP growth, and is struggling with tight labor market conditions with 600,000 fewer workers than before the pandemic.
“We’ve seen the biggest squeeze on living standards we’ve faced in this country on record,” Hughes said. “While real income will recover in the next three or four years, it’s still the case that people’s real spending power doesn’t get back to the levels it was before the pandemic even after five years.”
