The OBR’s Brexit analysis is based on flawed comparisons and unreasonable predictions

The Critic: 25th March 2024: Derrick Berthelsen on why OBR analysis on Brexit impact on UK is flawed. Long read. 

"When you compare apples with pears and then bananas you might get a half decent fruit salad but you will definitely get terrible analysis...

...the OBR state that their forecast for lower [UK] GDP outside the EU is based on a 4 per cent decline in productivity underpinned by a decline in trade intensity...The OBR have not reached this figure via their own in house economic model...Rather, they have reached their conclusion instead by looking at 13 modelled outcomes from 11 external providers and then calculating an average...

...The trouble is, whilst the OBR might claim that its analysis is based only on a decline in productivity underpinned by a decline in trade intensity, several of the studies they have included in their average do include a negative Brexit effect from immigration in their models...

...It is clear from the analysis... that there is an economic cost to leaving the EU single market and customs union. It is also clear that this direct cost is in the region of 1 per cent of GDP...

...incorporating an explicit link from lower trade intensity after Brexit to lower productivity growth — is simply not reasonable.

The OBR’s Brexit analysis is fundamentally flawed. Not only does it compare apples with pears, not only does it exclude any positive economic effects from leaving, it also includes unreasonable and unjustified predictions for productivity. 

The OBR should take its own advice and admit that the only costs of Brexit which can be safely and reasonably modelled and assumed are the direct costs. And that these direct costs are in part mitigated by post Brexit reshoring of production. The rest isn’t just apples and pears but unproven bananas."

FULL ARTICLE HERE