- Britain’s sluggish economy could soon resemble Italy’s due to the long-term impact of Brexit and the pandemic, a report has found.
- The Resolution Foundation has warned that exports to Europe have seen a significant drop since Britain left the EU.
- Italy’s annual GDP growth has averaged just 0.3% over the past decade.
According to a new report, Britain’s economy is set to deteriorate to the level of battered Italy over the next decade if it is not able to weather the blow from challenges including Brexit.
The Resolution Foundation, an economic think tank, and the London School of Economics said in a report on Tuesday that Britain faces a long decade of decline and underperformance due to its departure from the EU, as well as the impact of COVID-19. the pandemic, automation and the costly challenge of making the economy less dependent on fossil fuels.
“The UK now faces a breakthrough decade, as the consequences of Covid-19, Brexit and the transition to net zero are accompanied by major shifts in technology and demographics. This matters far more than economy. Failing to meet this challenge risks leaving the nation diminished and divided,” the report states.
—Nuffield Foundation (@NuffieldFound) May 18, 2021
The report suggests that the recent experience of Italy, where annual GDP growth has averaged 0.3% over the past decade, has shown that once a “relative decline” sets in in a country, it can “persist for a long time”.
“A decade of underperformance would significantly hurt living standards and could leave the UK behind other major European economies,” the report said.
If this relative decline continues unabated, the Resolution Foundation said the UK would find itself closer to Italy than Germany in terms of economic performance.
While the coronavirus pandemic has had a big impact on the economy, the report describes Britain’s exit from the EU as an “ultimately more lasting and more significant” change.
UK merchandise trade in the first quarter of this year was 14% lower than in the same quarter of 2020, the report notes, while trade with non-EU countries had yet to increase , despite efforts by the UK Department of Commerce to find new deals this year.
“Brexit is a huge change for the UK economy,” the report said.
“Since the night of the referendum, we have seen impacts on trade and investment that have rippled through labor markets and the macroeconomy.”