The National Institute of Economic and Social Research has said Brexit will cost Brits hundreds of pounds a year and revised down its UK GDP forecast just weeks after increasing it.
NIESR published a report on Wednesday claiming that the UK’s vote to leave the European Union has damaged living standards in the country and cost the average British household over £600 per year.
“It is almost certain that the relative deterioration in the UK economy and the accompanying fall in living standards over the past year are a consequence of the vote by the British people to leave the European Union,” said NIESR Director of Macroeconomic Modelling and Forecasting Dr Garry Young.
He added: “Had sterling not depreciated and the economy continued to grow at its previous rate (as would have been likely with an improving global backdrop) real household disposable income per head might have been more than 2 per cent higher than now, worth over £600 per annum to the average household.”
The body added that, making “very conservative” assumptions, it estimates that a UK exit from the European single market will increase the average cost of living by around one per cent, while for eight per cent of households the cost of living will increase by two per cent or more.
NIESR also downgraded its GDP forecast from 1.9 per cent and 2 per cent in 2018 and 2019 to 1.7 per cent for both years, adding that it expects growth in the following years to be weaker than it was before the referendum.
Suggesting that one man’s forecaster may be another man’s soothsayer, this comes just a few weeks after the same body revised up its GDP forecast as it predicted stronger growth in UK manufacturing and construction.
On 10 October NIESR rightly predicted that UK GDP would be 0.4 per cent in the third quarter of the year rather than the 0.3 per cent, thanks to better than expected growth in sectors including pharmaceutical production and housebuilding.
The think tank did, however, strike a cautious tone, stating: “Although economic growth is likely to be a touch stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year.
“And this at a time when real [gross domestic product] growth in other major economies such as the euro area and the USA has strengthened,” said Amit Kara, Head of Macroeconomic Forecasting at Niesr.
Defying the naysayers, however, the UK economy once again beat expectations today, with the IHS Markit Purchasing Manufacturers Index (PMI) increasing to 56.3 in October from 55.9 in September. Markets predicted the index reading would contract to 55.8.
Atul Kariya, manufacturing sector head at accountancy firm MHA MacIntyre Hudson, said: “Improving growth in the sector and an increase on last month’s figures demonstrate once again the continued resilience and drive of UK manufacturing.
“Overall, the sector has seen impressive performance to date, in the face of multiple economic and political pressures.”