Brexit

We analyse the trade routes between the UK and EU countries. Our results show that the relative importance of the UK as a trading partner in the EU has slightly decreased. We further decompose the total value added into components that quantify the value added that is generated through direct trade with the UK and the indirect trade that is channelled through third countries. Close to one third of the total value added is generated through indirect trade and two thirds through direct trade.

We estimate trend UK labour productivity growth using a Hodrick-Prescott filter method. We use the results to compare downturns where the economy fell below its pre-existing trend. We find that the current productivity slowdown has resulted in productivity being 19.7 per cent below the pre-2008 trend path in 2018. This is nearly double the previous worst productivity shortfall ten years after the start of a downturn. On this criterion the slowdown is unprecedented in the past 250 years.

Global trade in the 21st century is characterised by complex value chains. Successful exporters usually rely on quality imports, and exported goods cross borders many times before reaching their final consumer. This poses challenges to economic measurement as well as policymaking because it becomes difficult to characterise the true interdependencies between countries. Currently, estimates of the share of imports from a trade partner destined for re-exports, and the share used in the domestic economy, are crude at best. We develop a novel approach to estimate these shares.

In the wake of Parliament’s rejection of the proposed Brexit deal, there have been discussions between the Government and the Labour Party on a customs union as the basis for the future relationship between the United Kingdom and the European Union. This option also gained substantial support in the indicative votes held in the House of Commons in late March and early April. Therefore, even if the Government and the Labour Party cannot reach an agreement, a customs union deal is unlikely to disappear from the agenda any time soon.

In the last ten years, EU migrants have come to play an important role in the UK labour force. They have become increasingly present in low-skilled occupations, where the largest proportional increase has been migration from Eastern and Central European countries. Drawing on research carried out between November 2015 and July 2016 on the employment of EU migrants in the sectors of hospitality, food and drink and construction, we find that EU migrants have met employers’ needs for a flexible labour force but that the use of mobile workers in these sectors is long-standing.

A new skills-based immigration system, with a preference for the highly-skilled, is central to UK policy debates in the Brexit context, arguably responding to majority public opinion on migration. Through qualitative fieldwork with British, Polish and Romanian citizens living in two local authorities in England, this paper shows what participants understand by ‘low-skilled’ and how there is broad support of those who ‘contribute’, but are ‘controlled’ at the same time.

Free movement has been at the heart of the Brexit debate, with the government grappling between satisfying public and business demands for restrictive and liberal approaches to immigration respectively. In response the government have advocated temporary migration as a potential solution, including an expanded UK-EU Youth Mobility Scheme (YMS) modelled on the current T5 YMS on the assumption that YMS migrants undertake low-skilled jobs. Little is known about this visa or the labour market activity of YMS migrants.

As Britain prepares to leave the EU immigration policy has come to the top of the policy agenda. The Brexit vote was seen as a vote against free movement and new policies are aimed at introducing more restrictive controls. The report by the Migration Advisory Committee (MAC) in September 2018 recommended little new provision for low-skilled migration post-Brexit (MAC, 2018). This was then adopted by the Home Office in its Immigration White Paper, published in November 2018 (Home Affairs Committee, 2018).

On average, UK productivity performance in the decades leading up to the financial crisis was quite disappointing. Joining the EU was not to blame. Indeed, EU membership, which was an integral part of the Thatcher reform programme, had a significant positive impact. Over the long run, UK supply-side policies have been badly designed in various different ways. These design faults have not been the result of constraints imposed by EU membership but rather the consequence of domestic government failure.

You can also view the evidence as submitted to the Treasury Committee on the Treasury Committee website