I had little choice but to hot-foot over to the IMF webpage once I spied the alert in my inbox today: UK’s Economic Outlook in Six Charts. Really, in just six charts? Awesome. Show me the money. Well it turns out a bit of a fiddle. Yes there are six charts and some of them are really interesting. Some however are pushing a political agenda.
Chart 1: UK GDP 2011-2018 compared to G7.
Yes, in the last couple of years the recorded GDP growth of the UK has fallen from being in the top set of G7 counties to the bottom. How much of that is due to Brexit or natural economic cycles or other causes?
Chart 2; Brexit will be costly to the UK.
Ok so now my spider-senses are tuned in. Have you read The Economics of Brexit – a cost-benefit Analysis of the UKs economic relationship with the EU, by Philip Wyman and Alina Petrescu? I would recommend it. Page by page, chapter by chapter, these two researchers explore the small print of the analysis completed by the IMF, OECD, the Bank of England and others, that all point to (or pointed to) the economic decline of the UK assuming Brexit takes place. The small print of every analysis that concluded and concludes depression, resection, decline, all point to assumptions about how the UK policies will change (or not) and how other countries responses will change (or not). Quite frankly the conclusion is embossing.
Virtually every analysis that falls back on WTO or other frameworks assumes something that is just not practical or likely. Won’t the UK adjust interest rates if prices increase? Won’t the UK devalue sterling if wages exceed global competitive rates? Won’t the UK’s innovation seek higher rents and drive new innovation? Won’t tax policy favor growth? These are all ignored in one or other analysis. Thus every analysis is misleading. The IMF is just as bad as everyone else. In fact I conclude that there is no fair or practical economic analysis of what will happen with Brexit. Few economists can prove what net change in GDP came ab-out from joining the EU; how can they estimate the losses when you leave?
I will let you look at the other charts. They are interesting and somewhat informative, if you take the time to understand the assumptions and try to think of the argument the author wants to message. Either way, I recommend the book.