UK Brexit losses more than 17’800 percent larger than any possible gains
EUROPE | UK | ECONOMICS | TRADE
FACT BOX: Difference between PPP-GDP and Nominal-GDP: The GDP figure is calculated and reported in a country’s own currency. Thus India’s Nominal GDP is reported in rupees, Oman’s in Rial and Germany’s in Euro. Therefore, to compare the GDP of different countries, their GDP is converted into a common currency. The common currency is usually US dollars. This conversion can be done through two methods:
- Market exchange rate: The conversion is done using the market exchange rate. Let’s say the market exchange rate is 1$ = Rs.64.76. The Nominal GDP will be converted accordingly. The resultant figure is Nominal GDP expressed in dollars.
- Purchasing Power Parity (PPP): The conversion is done using the PPP exchange rate.
Nominal GDP does not take into account differences in the cost of living in different countries. Let’s say you can buy a cup of coffee in the US for 1$. But, in India, you can buy a cup of coffee as well as some hot food for 1$ or Rs.64.76. This is because the purchasing power is more in India as the cost of living is low.
Thus, you can have a higher standard of living in India with the same income you earn in the US.
To account for the differences in the cost of living between countries, we use the PPP exchange rate for conversion. The PPP exchange rate is the ratio of the currencies’ purchasing power. Example: You can buy a cup of coffee for 1$ in the US. In India, you can buy it for Rs.20. Hence, as per PPP, 1$ = Rs.20 and not Rs.64.76. This is why some countries that post a hight Nominal GDP but have a low quality of life score lower on the PPP-GDP index.
All potential trade deal gain as a result from Brexit only add up to a potential gain of 20p per person per year over a 15 year growth period the UK government’s own analysis states. Even in the most optimistic of best case scenarios this figures can not exceed 47p per person per year.
The laughable ‘economic boost’ claimed as a victory by Boris Johnson, equates to less than 0.00067% cent of annual per capita GDP, which is dwarfed by the economic hit from leaving the EU.
In 2020 the UK GDP lost more than 9.8% year on year. The UK Nominal-GDP now stands at only 12.5% of the USA’s GDP, and $1.2 trillion USD per year behind Germany and around half that of Japan. The closest nation in terms of comparable Nominal-GDP to theUK are France and India, although the UK’s GDP is shrinking at an alarming rate. Taking into account quality of life and cost of living and the UK slides even further with India being far beyond the reaches of the UK.
Top 15 nations by GDP-PPP (Purchasing Power Parity) 2021 ($ USD)*
- China – PPP $26.7t | Nominal $14.9t (2020)
- USA – PPP $22.7t | Nominal $20.8t (2020)
- India – PPP $10.2t | Nominal $2.6t (2020)
- Japan – PPP $5.6t | Nominal $5.0t (2020)
- Germany – PPP $4.8t | Nominal $3.8t (2020)
- Russia – PPP $4.3t | Nominal $1.5t (2020)
- Indonesia – PPP $3.5t | Nominal $1.1t (2020)
- Brazil – PPP $3.3t | Nominal $1.4t (2020)
- France – PPP $3.23t | Nominal $2.6t (2020)
- UK – PPP $3.17t | Nominal $2.6t (2020)
- Turkey – PPP $2.75t
- Mexico – PPP $2.6t
- Italy – PPP $2.6t | Nominal $1.9t (2020)
- Korea (South) – PPP $2.44t | Nominal $1.6t (2020)
- Canda – PPP $1.98t | Nominal $1.6t (2020)
- Spain – PPP $1.96t | Nominal $1.3t (2020)
- Saudi Arabia = PPP $1.7t
- Australia – PPP $1.4t | Nominal $1.3t (2020)
*Data taken form International Monetary Fund, World Bank and the CIA open source data.
According to analysis commissioned by British newspaper ‘The Independent’ compiled by top academics at the University of Sussex’s UK Trade Policy Observatory, the much-trumpeted free trade agreements (FTAs) “barely scratch the surface of the UK’s challenge to make up the GDP lost by leaving the EU”.
Johnson has boasted of the deals creating a “new dawn” and representing “global Britain at its best” yet none of his self-contradictory words have any measurable economic impact at all, apart form negative ones.
Official estimates from the Office for Budget Responsibility point to a Brexit loss of at least £1,250 per person per year over the next 15 years. This is more than 178 times (17’800% more than) the most optimistic prediction for the benefits from the trade deals and a staggering 6’250 times (625’000% more than) the realistically predicted outcome of the UK’s trade deals over the next 15 years.
The analysis noted that the vast majority of FTAs announced by the government, such as those with South Korea, Singapore and Vietnam, are simply attempts to replace treaties that those countries already have with the EU, which Britain previously enjoyed as a member. The new agreements are not on better or often even equal terms to those that were lost to Brexit. Most nations have not given the UK any replacement trade agreement at all.
“They add nothing to UK trade, and, because they are not perfect replicas, actually harm it very slightly,” wrote top trade economist Professor L Alan Winters, who conducted the analysis with Guillermo Larbalestier, the centre’s research officer.
© 2021 Al-Sahawat Times, Printed and Distributed by IPMG, an Al-Said Group entity.
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