Brexit Has Already Cost U.K. More Than 2% of GDP, UBS Estimates

(Bloomberg) -- The Brexit vote has already cost Britain more than 2 percent of economic output, even before the nation formally exits the European Union, according to analysis by UBS Group AG.

In a note published Monday, the bank estimated that gross domestic product is already 2.1 percent lower than where it would have been had the U.K. voted to remain in the EU, while investment is 4 percent weaker, inflation 1.5 percent higher and consumption 1.7 percent lower.

While the U.K. has avoided the recession forecast by some in the wake of the 2016 referendum, growth has lagged behind most of its major peers. UBS said that a pickup in the global economy in the past two years has helped mask some of the worst impacts of Brexit, allowing “growth to move sideways rather than dive lower.”

Still, “to put that 2.1 percent cumulative decline in real growth into context, that’s roughly a quarter to a third of the total Brexit costs estimated in the most pessimistic assessments done prior to the EU referendum and almost equal to the full costs of some of the more optimistic assessments,” wrote UBS analysts including Pierre Lafourcade. “But the U.K. has not even left the EU yet!”

UBS compiled the figures by comparing the U.K.’s current economic data with that of a “doppelganger” made up of the data from other countries not affected by Brexit, in way that mimics the U.K.’s performance before that vote.

©2018 Bloomberg L.P.