- Britain's sluggish economy could soon resemble Italy's due to the long-term impact of
Brexit and the pandemic, a report said. - The Resolution Foundation warned that exports to Europe have seen a major decline since Britain's exit from the EU.
- Italy's annual GDP growth has averaged just 0.3% in the last decade.
Britain's economy is on course to deteriorate to the level of deeply-struggling Italy over the next decade if it is unable to overcome the hit taken by challenges, including Brexit, according to a new report.
The Resolution Foundation, an economics think-tank, and the London School of Economics said in a report on Tuesday that Britain faced a long decade of decline and underperformance due to its departure from the EU, as well as the impact of the COVID-19 pandemic, automation, and the expensive challenge of making the economy less reliant on fossil fuels.
"The UK now faces a decisive decade, as the aftermath of Covid-19, Brexit and the net zero transition come together with major shifts in technology and demography. This matters far more than economics. Failing to rise to this challenge risks leaving the nation diminished and divided," the report said.
-Nuffield Foundation (@NuffieldFound) May 18, 2021
The report suggests that the recent experience of Italy, where annual GDP growth has averaged 0.3% in the last decade, showed that once "relative decline" sets into a country, it could "persist for a long time."
"A decade of under performance would significantly harm living standards and could leave the UK falling behind other leading European economies," the report said.
If that relative decline continued at the same pace, the Resolution Foundation said that the UK would end up closer to Italy than Germany in terms of economic performance.
While the coronavirus pandemic has had a big impact on the economy, the report described Britain's exit from the EU as an "ultimately longer-lasting and more significant" shift.
The UK's trade in goods in the first quarter of this year was 14% lower than in the same quarter in 2020, the report noted, while trade with non-EU countries had not yet increased, despite efforts by the UK's trade department to strike new deals this year.
"Brexit constitutes a huge change for Britain's economy," the report found.
"Starting from the night of the referendum, we have seen impacts on trade and investment that have passed through to labour markets and the macroeconomy."