You are here: Home - Saving & Banking - News -

Brexit vote has cost households £600 each

0
Written by: Paloma Kubiak
01/11/2017
The UK’s decision to leave the EU - and its impact on sterling and worker productivity - has led to households losing out on £600, according to a leading think-tank.

The UK was one of the fastest growing advanced economies in the run up to the EU referendum in June 2016.

The ‘leave’ vote has meant that the UK economy is beginning to slow as others pick up the pace, according to the National Institute of Economic and Social Research (NIESR).

As such, it said this growth rate “represents a material loss of momentum from annual rates of GDP growth of around 2-3% achieved in the years leading up to the referendum”. And productivity growth has also slackened as output per hour has been flat or falling.

As a result, household real incomes have also fallen in this time. According to the Office for National Statistics (ONS), real household disposable income per head fell by 1.1% in the year to Q2 2017. This was the fourth consecutive quarterly fall in this measure of real income and the longest period of consistent negative growth since the end of 2011, it found.

The NIESR report author, Garry Young, wrote: “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.

“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% higher than now, worth over £600 per annum to the average household.”

The report noted that the effects of a higher cost of living caused by Brexit might weigh more heavily on unemployed, single parent and pensioner households.

Further, weaker investment by UK businesses has also led to a slowdown in productivity growth. Latest figures reveal business investment grew by 2.5% in the year to Q2 2017 and while this is stronger than expected, NIESR said it represents a slowdown from faster growth rates of around 5% seen during 2010 and 2015.

In summary, Young wrote: “The UK economy is going through a period of significant uncertainty, with material downside risks as Brexit is being negotiated. In such circumstances it makes sense for individual businesses to postpone investment until there is more clarity about the UK’s future relationship with the EU. It also makes sense for some planned fiscal consolidation to be delayed as this can act to offset some of the uncertainty. But there appears to be less reason to postpone the start of the process of monetary policy normalisation: some rise in rates now appears necessary to keep inflation at target.”

The Bank of England’s Monetary Policy Committee will publish its decision on interest rates tomorrow.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
2265324-pen-calculator
‘Clumsy system’ sees pension freedoms users reclaim £37m of tax

People aged 55+ using pension freedoms to withdraw money from their lifetime savings pots have had to reclaim £37m from...

Close