BREXIT will lead to a “poorer and less productive” UK in the decade ahead, with workers in Scotland predicted to lose out the equivalent of £400 a year, according to a new report.
The analysis by the Resolution Foundation, which comes ahead of the sixth anniversary of the EU referendum on 23 June, has concluded leaving the EU has reduced how open and competitive Britain’s economy is.
While the impact of leaving the EU on wages will take time to emerge, by 2030, real pay set to be £400 – just over 1% - per worker lower each year in Scotland, on average, than it would otherwise have been.
The report also found the immediate impact of the Brexit referendum result has been clear, with cost-of-living increases resulting in a reduction of annual average UK household income of £870 a year.
The UK has not seen a large relative decline in its exports to the EU that many predicted, although imports from the EU have fallen more swiftly than those from the rest of the world, the study suggested.
Britain has experienced a decline of 8% in trade openness – trade as a share of economic output – since 2019, losing market share across three of its largest non-EU goods import markets in 2021, the US, Canada and Japan.
Overall differences between regional outcomes across the UK are “relatively small”, the researchers found.
But Scotland is expected to outperform the average in terms of output, while the north east of England is predicted to be hardest hit.
However some sectors will feel the impact far more than others – such as fishing, which is facing a 30% fall in output due to the lost of important consumer markets in the EU.
Sophie Hale, principal economist at the Resolution Foundation, said: “Brexit represents the biggest change to Britain’s economic relationship with the rest of the world in half a century.
“This has led many to predict that it would cause a particularly big fall in exports to the EU, and fundamentally reshape Britain’s economy towards more manufacturing.
“The first of these has not come to pass, and the second looks unlikely to do so. Instead, Brexit has had a more diffuse impact by reducing the UK’s competitiveness and openness to trade with a wider range of countries. This will ultimately reduce productivity, and workers’ real wages too.”
The report, ‘The Big Brexit: An assessment of the scale of change to come from Brexit’, says it provides the “most detailed assessment to date” of the impact of the UK’s deal with the EU on trade flows.
It found trade costs have increased by 10.8% for exports to the EU and 11% for imports from the EU.
These figures rise to 16.2% and 16.6% when the fact the EU is likely to integrate further in future years is taken into account.
Hale added: “Some sectors – including fisheries – still face significant change to come in the years ahead. But the overall services-led nature of the UK economy will remain largely unaffected. Some manufacturing sectors, such as food manufacturing, will grow but others will shrink, including advanced manufacturing.
“The latter are generally higher productivity, and pay higher wages, than the former, showing how a less open economy feeds through into household living standards.”
SNP MP Drew Hendry said the report "lays bare the reality of the Tories’ Brexit obsession" and its "devastating impact".
He said: “Falling wages, shrinking sectors, and reduced productivity are all far from the grandiose promises offered up by the Tories in 2016.
“And falling imports from our closest neighbours in the EU is the true cost of higher tariffs and unnecessary trade barriers erected by the disastrous Brexit fallout.
“This report makes clear that it is more important than ever for Scotland to chart its own course with independence – allowing us a return to the EU and a market seven times bigger than the UK – and escape the mess the Tories have created.”
