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

Has Brexit hurt the UK's economy?

New paper with @swatdhingraLSE reviews the evidence ukandeu.ac.uk/working-paper/…

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/

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

cep.lse.ac.uk/pubs/download/…

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

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

blog.ons.gov.uk/2021/07/08/in-… @ONS @mikestoyanov13 I find this explanation plausible, but would need to see more detailed analysis before drawing a firm conclusion.

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.

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%

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 @financialtimes 1. 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.

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.

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%

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

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/

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

Thread below.

Or read the @UKandEU blog: ukandeu.ac.uk/the-uk-economy… 1/ Covid-19 is a huge short-run shock, but likely to have smallish long-run effects

Brexit will matter less in the short-run, but have bigger permanent output costs

Figure below shows output forecasts based on government & Bank of England projections 2/

Four years on, how has the Brexit vote affected the UK economy?

Higher import prices, reduced investment, slower growth. Trade & employment resilient

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

tinyurl.com/y785jp2u 2/

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/

https://twitter.com/jdportes/status/1234253114682880001

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/