Economics expert Paul Johnson on how Brexit has ‘unquestionably’ hit the economy – and only long-term investment and reform will truly boost growth
I take that with a pinch of salt.
It has made a judgement that the UK is doing worse than other developed countries, and I’m not saying it is wrong, just that it’s not very clear how it came to that judgement. Most forecasts say that the economy is 4 per cent smaller than it otherwise might have been. We know that we are a less trade-intensive economy, and that investment [into the UK] has fallen away relative to what it might have otherwise been. Unquestionably it has had an effect.
Pay increases will depend on what happens with inflation. But it remains the case that the labour market is incredibly tight, as half a million or so people have stopped working, so the pressures on employers paying increases for wages will remain.The policies that are effective in terms of promoting growth are long-term ones.
I would be focusing on housing, and looking at reforms to the tax system that would help long-term growth. In one sense, you could argue this is a movement to be brave. Being cautious isn’t going to win you the election.Prioritising sorting out a deal with the European Union, which takes us as close to the single market as we can possibly get, would certainly help. We now know the stability and certainty in that relationship is vital for investment.
Let’s assume they settle to around the 3 per cent mark. If they do, that is a much healthier position than zero, where they were effectively until the end of last year.
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