The effects of Brexit on the UK economy

• Published in: World economy Vol. 42; no. 1; pp. 57 - 67
• Main Author: Minford, Patrick
• Format: Journal Article
• Language: English
• Published: Oxford Blackwell Publishing Ltd 01.01.2019
• Subjects: Colleagues; Economic analysis; Economists; Equilibrium; EU membership; Free trade; Friendship; Gravity; Immigration; Immigration policy; Legislatures; Mass media; Protectionism; Quantitative analysis; Referendums; Regulation; United Kingdom > UK
• ISSN: 0378-5920; 1467-9701
• DOI: 10.1111/twec.12771

I was astonished during late 2015 to discover that most economists in the UK favoured staying in the EU on the basis of what appeared to be neo‐protectionist arguments derived from recent “gravity‐related” trade thinking. In late additions to the second edition of my book “Should the UK leave the EU?” (Minford, Gupta, Mahambare, & Xu, 2015), I pointed out that the gravity modelling was of a partial equilibrium nature and that attempts hitherto made to turn it into general equilibrium were misconceived. It soon became apparent that my professional colleagues were not going to take any notice of these points, and indeed, the Treasury economists promptly enlisted help from the LSE's gravity trade group in developing the gravity‐based case for retaining existing trade links with the EU regardless of the costs of its well‐known protectionism. In the same vein, they disregarded the effects of both EU regulation and uncontrolled EU unskilled immigration. Accordingly, I felt compelled to enter the EU referendum debate and with the help of friends and colleagues founded Economists for Brexit, which after the referendum was renamed and expanded as Economists for Free Trade; the aim of this group has been to explain the economic arguments for leaving the EU. In this paper, I set out these arguments and the modelling and facts from which they are derived. I also relate them to the ongoing debate in the UK media and Parliament.I begin in section 2 with an account of my and co‐authors’ modelling work on trade and my comments on the various rival approaches. I then go on in section 3 to set out the quantitative analysis we reached on Brexit, using these tools and the policy assumptions from available data, and contrast it with the equivalent work of others. I conclude in a brief section 4 with our estimates of the net gains or losses from various options that have been the subject of negotiations with the EU.