An Economic Score Card for the UK: 10 Theses

1. For the UK economy, Brexit is a self-induced supply-side shock that risks worsening the existing secular slowdown in the potential growth rate of GDP.

2. The best outcome for the UK economy would be to simply remain a full member of the EU common market. But that is unlikely to happen.

3. Economic policy measures implemented in the UK since 2008 have inadequately addressed the structural issues facing the economy.

4. The government’s “hard-rhetoric-soft-touch” approach to fiscal and supply-side policy has failed to eliminate the public sector deficit, at around 4% of GDP. It also has not led to a rebalancing of economic activity towards the lagging industrial and construction sectors.

5. During the pre-crisis years, the slowdown in the UK’s underlying rate of growth had been disguised by a debt-fueled consumption binge. This had not been properly acknowledged until recently.

6. The tepid pace of the post-Lehman expansion has shown that the UK economy’s trend rate of growth is lower than previously thought. Growing structural problems underlie this slowdown.

7. The UK economy suffers from weak productivity growth, imbalances across sectors of the economy, and a high level of inequality relative to other advanced economies.

8. While the Brexit vote has not triggered a short-term economic crisis, it is likely to have significant negative effects on the UK economy in the long run.

9. Less trade, investment and migration with its major market, the EU, will reduce the UK’s potential growth rate if policymakers do not take measures to counter it.

10. Brexit requires a coordinated policy response that deliberately addresses the underlying structural problems. Disappointingly, the response so far has been “more of the same.”