Former Tory chancellor Jeremy Hunt has claimed Brexit’s impact on the economy was “overly exaggerated”, as he backed a controversial report which claims official forecasts on the trade impact of leaving the EU were “flawed”.
Hunt, who voted Remain in 2016, said the report by Policy Exchange, a right-wing think tank, showed “Brexit has had much less impact on British exports to the EU than has been previously thought”.
However, senior former civil servants with expertise in the economy and trade suggested the evidence highlighted in the report was picked “selectively” and there was nothing to “change the consensus view that Brexit is still a significant part of the reason we’ve had such terrible export performance”.
The report’s key findings include suggestions that the UK was already underperforming rival developed nations in growing its exports to the EU.
It suggests that while the volume of vehicle exports to the EU fell 28 per cent from 2019 to 2023, its value dropped only 2 per cent as Britain moved towards making luxury and premium vehicles.
“Re-exports” – goods imported to the UK and immediately exported again, also accounted for declining performance in trade, the report claims, while arguing that Government should continue rejecting the suggestion that it must prioritise EU trade over closer economic links with the United States.
The research also rejects the analysis by the UK’s fiscal watchdog, the Office for Budget Responsibility (OBR), which has found that exports and imports will be 15 per cent lower in the long run than if the UK had remained in the EU, and that long-run productivity will be 4 per cent lower.
The new report has been released as Sir Keir Starmer looks to reset ties with the EU, partly to boost trade and economic growth.
Hunt said: “This excellent paper by Policy Exchange clearly demonstrates that Brexit has had much less impact on British exports to the EU than has been previously thought.
“Policy Exchange’s work in this area should be carefully scrutinised by the OBR when they next update their models.”
However, David Henig, a former senior UK civil servant who helped set up Britain’s post-Brexit trade policy in Whitehall, said that this argument amounted to “selective evidence” with “no robustness”, and amounted to “focusing on small illustrations that deny any impact of changed trading arrangements.
“So for example – the move to luxury vehicle production, we were already strong in this sector but have lost ground in EU exports of volume cars. That’s obviously a Brexit effect but is ignored in the telling.”
Henig, now UK director of the European Centre For International Political Economy, said the report was “utterly lacking in credibility” and “just another attempt to selectively pick some evidence to show why the UK-EU economic relationship defies the normal rules of economics. It doesn’t.”
Report is not ‘junk’
Jonathan Portes, a senior former Civil Service economist, said that the report was not “junk” and was a “sensible and constructive piece of work” but would not shake the accepted view that Brexit has damaged UK trade.
“Basically, it says there are a bunch of other things going on at the same time which complicate the interpretation of the statistics, and that’s true, there always are,” he added.
“It doesn’t negate the fact that UK goods exports have performed very badly since Brexit, and considerably worse in the years running up to Brexit, and there is a wide variety of analysis that concludes that Brexit is at least partly responsible for that, if not wholly responsible for that, and I think that remains the consensus view.
“I don’t think this will change the consensus view that Brexit is still a significant part of the reason we’ve had such terrible export performance, but equally it does correctly point out there’s a bunch of other things going on and Brexit’s not the whole story by a very long way.”
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