A leading economist has claimed that Brexit is the ultimate reason why the UK is facing a fresh round of austerity. Michael Saunders, a former external member of the Bank of England's monetary policy committee, said that the UK economy has been 'permanently damaged' by leaving the European Union.
“If we hadn’t had Brexit, we probably wouldn’t be talking about an austerity budget this week," said Mr Saunders in an interview with Bloomberg TV. “It’s reduced the economy’s potential output significantly, eroded business investment. The need for tax rises, spending cuts wouldn’t be there if Brexit hadn’t reduced the economy’s potential output so much.”
Mr Saunders, who left the rate-setting committee in August after six years in the role, said the main legacy of that period was weak economic output. He spoke as the Prime Minister, Rishi Sunak, and the Chancellor, Jeremy Hunt, prepared to reveal their economic plan in this week's autumn statement. Mr Hunt, who is to address parliament on Thursday, warned there would be a “tough road ahead”.
Mr Saunders’ comments came as Bloomberg suggested that the US dollar value of shares listed in London had been overtaken by Paris. Asked about this turn of events, Saunders said it was only one illustration of the broader damage caused by Brexit.
The pound’s depreciation following both the Brexit referendum and Liz Truss’s mini-budget was a likely factor behind the shift in fortunes, he added. Long-term concerns about consumer resilience in the face of the cost of living crisis also depressed market valuations for mid-sized listed firms.
He added he felt that some of the intentions behind Truss’s failed mini-budget were correct, including the desire to raise the potential of the UK economy. He said: “Liz Truss, in her brief failed premiership, got that one point right.” However, the methods of cutting taxes and pushing for deregulation chosen by Truss and her chancellor, Kwasi Kwarteng, were less wise.
Mr Saunders advised that more emphasis should be put on improving trade links with the EU along with investment in education and addressing the problem of long-term sickness among working-age people. He also suggested raising output by increasing the number of skilled and unskilled immigrants into the UK.
Figures show that the French stock market now has a combined value of 2.823 trillion US dollars, marginally above the UK stock market which is worth 2.821 trillion US dollars altogether, according to Bloomberg. In 2016, the year of the Brexit referendum, British stocks were collectively worth 1.5 trillion US dollars more than those listed in Paris.
For stories from where you live, visit InYourArea.
Find recommendations for eating out, attractions and events near you here on our sister website 2Chill
Find recommendations for dog owners and more doggy stories on our sister site Teamdogs
