Why was the not-a-budget so poorly received? I think it failed in 5 distinct ways
1. Wrong time for expansionary tax cuts 2. No plan to bring deficit under control 3. Unlikely to have much effect on growth 4. Does not address crisis in NHS & public services 5. Raises inequality
1. Timing
It's a mistake to use tax cuts to stimulate economy at same moment Bank is raising interest rates
Bank wants to reduce inflation by dampening economic activity. Expansionary budget makes that job harder & may lead to additional interest rate rises & more pain
We conclude UK economy was around 2 to 3 percent smaller at end of 2019 because of Leave vote
Fall in GDP equates to loss of £650 to £1000 per person per year 1/
We study the period between referendum in June 2016 & UK leaving EU in 2020
Why did Brexit affect economy while UK was still an EU member?
We highlight two channels that drove the losses
1. Fall in the pound 2. Uncertainty about economic policy & future trade barriers 2/
Oct 4, 2021 • 6 tweets • 2 min read
How is Brexit likely to affect real wages in the UK?
Quick thread on the need to distinguish average effects from redistribution between different groups.
Higher trade barriers will reduce the efficiency of the UK economy. Impact is similar to a decline in aggregate productivity
Economists expect Brexit to reduce average incomes by around 4%, leading to a similar decline in average real wages
TCA has led to a dramatic fall in UK imports from EU
New ONS trade data for July shows EU imports down about 20% compared to non-EU imports since start of year
Importantly, drop appears to be persistent not transitory - see chart below
And, surprisingly, this fall has happened before UK introduces customs checks on EU imports
By contrast, after the initial collapse in January, UK exports to EU have recovered strongly. No sign of a persistent decline in EU relative to non-EU exports so far this year - see chart
Jul 9, 2021 • 7 tweets • 4 min read
Potentially important new @ONS blog on why UK & Eurostat trade data differs in 2021 (h/t @mikestoyanov13)
Argues difference driven by Eurostat switching to recording imports from UK on country of origin rather than country of dispatch basis in 2021
Note that in essence the ONS saying that the UK is right and Eurostat is wrong when it comes to 2021 data on UK exports to EU.
Jul 9, 2021 • 8 tweets • 4 min read
New ONS trade data for May just published shows UK-EU trade remains low compared to pre-TCA levels
Surprisingly difference relative to non-EU trade is driven entirely by imports, not exports
Goods trade May-21 vs May-19
EU 🇪🇺 -12%
Non-EU -2%
Total -7%
Exports are lower than pre-TCA and pre-Covid, but the decline is similar for EU and non-EU exports
UK exports May-21 vs May-19
EU 🇪🇺 -5%
Non-EU -6%
Jun 30, 2021 • 5 tweets • 1 min read
Liz Truss has over-ruled Trade Remedies Authority recommendation to remove some steel safeguarding tariffs. Some quick thoughts on why this is important.
UK unveils emergency legislation to protect domestic steelmakers ft.com/content/7292c0… via @financialtimes1. Illustrates UK trade policy will not be immune to industry lobbying. Protection for sale lives on. Not a surprising development given the strength of the steel lobby, but likely to be bad news for consumers.
May 12, 2021 • 11 tweets • 3 min read
More evidence that Brexit has reduced UK-EU trade in 2021.
UK goods trade with EU down 14% in first quarter compared to Q1 2020. Trade with non-EU flat.
Q1 2021 vs Q1 2020
EU: -14%
Non-EU: 0%
As Covid-19 has similar effects on EU & non-EU trade, comparing changes with EU vs non-EU gives a rough estimate of the Brexit effect.
By this metric, Brexit reduced UK goods trade by 14% in the first quarter of 2021.
Or comparing Mar-21 to Mar-20 implies a 9% Brexit effect.
Mar 12, 2021 • 19 tweets • 6 min read
UK trade with EU collapsed in January according to ONS data. Much smaller falls in trade with non-EU countries
Compared to previous January, for goods (excluding precious metals):
EU exports: - 38%
EU imports: - 16%
Non-EU exports: -8%
Non-EU imports: -9%
Total exports: -25%
Total imports: - 20%
Goods trade: -16%
Services trade: -32%
Mar 11, 2021 • 10 tweets • 3 min read
Tomorrow the ONS will release its first estimates of UK trade for January. Here are six reasons to be cautious when interpreting the data
1. Speed of adjustment. Shifts in trade patterns don't occur instantly. Trade economists expect impact of Brexit to emerge gradually over a decade or more. One month's data won't prove or disprove any forecasts
Dec 14, 2020 • 12 tweets • 4 min read
A few thoughts on how Brexit is likely to affect the UK economy in 2021 - with the caveat that much remains uncertain 1/
Most important change on January 1st will be higher trade costs due to creation of UK-EU customs border plus restrictions on what services trade is allowed
Costs from regulatory divergence likely to be at least as important as border costs in the long run, but not immediately 2/
Aug 24, 2020 • 6 tweets • 2 min read
Is Covid-19 or Brexit a bigger shock to UK economy?
In terms of present value of GDP, Brexit impact is forecast to be 2-3 times bigger than Covid-19 effect
Evidence points to annual cost per person between £500 and £1000
Thread summarising academic literature to date (pre-covid) 1/
GDP
UK growth slowed after the referendum relative to other countries
Using synthetic control method, @bornecon, Mueller, @MSchularick & @SedlacekPe estimate loss of 2.1% of GDP by Q1 2019. This amounts to £45 billion per year or £700 per person
UK-US trade talks begin today. I think it's a mistake for the UK to start negotiating with the US at this stage. Quick thread on why. 1/
Starting point is that potential gains from US deal are much smaller than costs of leaving the EU. Government's own analysis suggests an ambitious US deal would raise GDP by around 0.2% of GDP. Costs of Brexit are an order of magnitude higher. 2/
What do businesses talk about when they talk about Brexit?
Fascinating new paper by Hassan, @StephanHollan, @L_van_Lent & Tahoun looks at this question by analysing the transcripts of conference calls firms hold when announcing their earnings. drive.google.com/file/d/119I4ka… 1/
Using techniques from computational linguistics, paper measures whether firms are positive or negative about Brexit (which the paper calls 'Brexit Sentiment') and how much risk firms face because of Brexit 2/