Brexit is already costing the average UK household £7.74 per week or £404 per year, according to new analysis from the Centre for Economic Performance (CEP) at the London School of Economics and Political Science (LSE). The study is the first detailed statistical analysis of how the referendum outcome has affected UK inflation, real wages and living standards.
Real wage growth has also been reduced by higher inflation. Price increases due to the referendum amount to a £448 cut in annual pay. For the average worker, the Brexit vote has cost almost one week’s wages.
Inflation effects have been largest for products with large import shares such as bread and cereals; milk, cheese and eggs; coffee, tea and cocoa; beer; wine; furniture and furnishings; and jewellery, clocks and watches.
The study also found that households at all income levels and in all UK regions have experienced higher inflation because of the referendum. The costs have been evenly shared across the income distribution, but not across geographic areas. The rise in inflation has been lowest for households in London, while Scotland, Wales and especially Northern Ireland have been worst hit.
The report, based on research funded by ‘The UK in a Changing Europe’ was authored by CEP researchers from LSE, the University of Warwick, and the University of Nottingham.
Co-author Dr Thomas Sampson of the CEP comments:
“Even before Brexit occurs, the increase in inflation caused by the Leave vote has already hurt UK households.”
“Our results provide compelling evidence that, so far, UK households are paying an economic price for voting to leave the EU.”
Dr Dennis Novy of the University of Warwick adds:
“Our research is not a Brexit forecast. It is about the costs of Brexit that have already materialised. The results show that living standards in the UK have already suffered.”
“Households all across the country are hit by higher inflation – without matching pay rises. The increase in inflation can be directly traced back to last year’s referendum when the sterling exchange rate dropped sharply.”
Dr Holger Breinlich of the University of Nottingham says:
“Ahead of Wednesday’s Budget statement from the Chancellor, our findings show that the Leave vote has led to a sharp increase in inflation.”
“At a time of growing disenchantment with austerity, this is clearly unwelcome news for living standards across the UK.”
Source: The London School of Economics and Political Science