That’s because increased costs of doing business with the rest of Europe -- which accounts for about half of all UK trade -- will mean lower levels of commerce and foreign investment, and thus lower average incomes in Britain, he said.
“The cost is going to be way bigger than the amount we currently send to Europe,” Van Reenen said in an interview on Bloomberg Television’s Surveillance with Tom Keene and Francine Lacqua. “By splitting more away from the rest of Europe, we’ll lose foreign investment, we’ll lose some trade and the consequences will actually be negative for our productivity.”
The UK economy has so far shown unexpected resilience following the vote to leave the trading bloc. Growth beat expectations again in the fourth quarter, coming in at 0.6 per cent, although the expansion is still being almost entirely driven by services and consumer spending, continuing the lopsided trend of recent years.
The Bank of England predicts growth will slow this year as the weaker pound fuels inflation and uncertainty over Brexit negotiations hinders investment.
“People often underestimate the benefits of having trade and foreign investment, and overestimate the costs, I think, of having immigration,” Van Reenen said. Britons “don’t realize that there are a lot of benefits to having good trade, that by having highly open trade with other countries this can be very beneficial and raise living standards.”
/Bloomberg/
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