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Brexit

Britain's Economic Woes: A Critical Analysis of Productivity, Brexit, and Technological Development

Strategic Insights

— 2 min read

As the Office for Budget Responsibility (OBR) downgrades its forecast of Britain's productivity growth, Labour leader Keir Starmer is right to be incandescent at the implications. Brexit has hit productivity and the economy harder than previously thought, with independent research suggesting losses of 6-8% in output and 12-18% in investment. This has resulted in permanent damage to the economy, with the exchequer losing up to £80bn in tax revenue every year. In contrast, the OBR's earlier estimates were much more optimistic, and the chancellor's efforts to negotiate better terms with the EU have had limited success. Meanwhile, the UK's top companies are weak at creative destruction, with only 1 in 20 innovative challenger companies remaining independent. To address these issues, the government must plot a way out of the economic disaster that is Brexit by investing in British private assets, including venture capital to support young tech companies, and reforming the tax system to encourage more generosity among tech founders and investors.

Key Takeaways:

  • The OBR's forecast of Britain's productivity growth has been downgraded, with implications for the economy and the government's credibility.
  • Brexit has had a devastating impact on the economy, with losses of 6-8% in output and 12-18% in investment, compared to what it would have been had the UK remained in the EU.
  • The exchequer has lost up to £80bn in tax revenue every year due to Brexit.
  • The UK's top companies are weak at creative destruction, with only 1 in 20 innovative challenger companies remaining independent.
  • The government must invest in British private assets, including venture capital to support young tech companies.
  • The tax system needs to be reformed to encourage more generosity among tech founders and investors.

Sources:

  • Will Hutton, "Keir Starmer did not contain his rage when he learned the Office for Budget Responsibility (OBR) would downgrade its forecasts of Britain's productivity growth in its budget economic assessment." (The Observer)
  • Bank of England monetary policy committee member Swati Dhingra, " Speech at the London School of Economics" (The Financial Times)
  • Rachel Reeves, "Economic disaster of Brexit" (The Guardian)
  • Best for Britain, "Brexit polling" (Breitbart News)
  • Sterling 20 initiative, "Launched to boost investment in UK assets" (The Financial Times)
  • Mario Draghi, "A full-scale innovation partnership with common administrative, financial and regulatory rules for the EU and UK" (The Financial Times)
  • Nick Thomas-Symonds, "Europe minister" (The Financial Times)

Statistics:

  • 62% of respondents believe Brexit is a failure, according to recent polling by Best for Britain.
  • 72% of those who think Brexit a failure blame Nigel Farage.
  • £80bn: the maximum amount of tax revenue lost by the exchequer every year due to Brexit.
  • 6-8%: the loss of output due to Brexit, according to independent research.
  • 12-18%: the loss of investment due to Brexit, according to independent research.
  • £25bn: the amount of investment promised by leading UK-based insurance companies and pension funds over the next five years.
  • £52.5bn: the amount of tax relief enjoyed by pensions funds on British shares last year.
  • 1 in 20: the proportion of innovative challenger companies that remain independent in the UK.

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