Gross Domestic Product (GDP) has been found to be 2.1% lower than it would have been had Brexit not happened, according to a UBS report released on Monday.
The research suggests that if the UK had not voted to leave the European Union, investment would have been at 4% higher and inflation 1.5% lower.
The report also revealed that consumption is 1.7 percent lower and the real effective exchange rate (REER) has depreciated by 12 percent.
Economists at UBS measured how much Brexit has cost the UK so far by analysing and comparing to what the GDP would have looked like now had Remain won the vote in 2016.
According the report, “without Brexit we think UK GDP could have been 100 basis points per year higher.”
What does this mean for accountancy?
Negotiations between the UK and EU seem to be worsening with the UK government failing to come to agreements on the type of Brexit they want next March.
In fact, progress is so slow that HMRC released a report last month detailing the VAT implications of a ‘no deal’ Brexit, informing the public that while they still thought it unlikely, they must prepare for the scenario that no agreement is reached.
The EU’s chief negotiator, Michael Barnier, rejected Theresa May’s Chequers plan which envisioned the country abiding by a common rulebook for goods but not services.
This uncertainty does not help the UK’s future growth forecasting. The International Monetary Fund lowered its UK GDP growth forecast for 2018 recently, now predicting a 1.4 percent growth compared with 1.6 percent in April.
Despite the concern, the UK economy grew by 0.4 percent in the second quarter from the first quarter, which was the same growth as the Eurozone.
UBS economists added that while there have been some negatives surrounding Brexit, like unemployment dropping to its lowest level since 1974 (four percent), wage growth is increasing and gross fixed capital formation has improved in the second quarter of this year.
Uncertainty is the main pain point for accountants when it comes to Brexit. There is uncertainty around how Brexit will impact tax, accounting standards, the accounting jobs market, and so on.
There is no escaping the confusion as we muddle close towards 29 March 2019. All accountants can do is stay up to date with Brexit-related changes and help their clients prepare for all eventualities.