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The True Cost of BREXIT for the UK: A Research Note

Author

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  • Paul J.J. Welfens

    (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))

Abstract

The HM Treasury analysis (2016) of the long-term benefits of EU membership for the UK implicitly argues that the associated output loss of BREXIT is 10%, while Patrick Minford has argued that a 4% output increase could be expected. More recent analysis from Rabobank suggests an output loss of 18 % for the UK in the event of a 'no-deal' BREXIT. The subsequent rough estimate presented here shows that real national income is likely to fall by 16% in a no-deal BREXIT - where a 2% income gain from a possible US-UK transatlantic trade and investment partnership treaty and 1% gain resulting from zero tariffs on the import of agricultural products have been included. The cumulated income loss - based on a present value-analysis - is almost three times as large as the UK output decline during the Great Depression; however, the BREXIT-related output decline would be spread over a period of about 15 years. For the lower strata of society serious problems will emerge in such a setting; it is strange that the Remainers in the UK have almost no voice in terms of political party representation. As regards power in Brussels: based on Banzhaf values (game theory), the big countries in the EU will be the winners of BREXIT; even if Scotland joins later.

Suggested Citation

  • Paul J.J. Welfens, 2017. "The True Cost of BREXIT for the UK: A Research Note," EIIW Discussion paper disbei234, Universitätsbibliothek Wuppertal, University Library.
  • Handle: RePEc:bwu:eiiwdp:disbei234
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    References listed on IDEAS

    as
    1. Andre Jungmittag & Paul J.J. Welfens, 2016. "Beyond EU-US Trade Dynamics: TTIP Effects Related to Foreign Direct Investment and Innovation," EIIW Discussion paper disbei212, Universitätsbibliothek Wuppertal, University Library.
    2. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1191-1217.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Brexit; UK; Global Britain; EU; Disintegration;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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