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Montevideo, November 23rd 2017 - 05:38 UTC

OECD suggests “reversing the Brexit process” would boost the UK economy

Wednesday, October 18th 2017 - 07:21 UTC
Full article 13 comments
Chancellor, Philip Hammond, said the UK would consider the Organization for Economic Co-operation and Development (OECD)'s report and act where it could. Chancellor, Philip Hammond, said the UK would consider the Organization for Economic Co-operation and Development (OECD)'s report and act where it could.
OECD's chief Angel Gurria, said any future relationship with EU should be close: “It will be crucial EU and UK maintain the closest economic relationship possible.” OECD's chief Angel Gurria, said any future relationship with EU should be close: “It will be crucial EU and UK maintain the closest economic relationship possible.”

Reversing the Brexit process would boost the UK economy, the international economic body, the OECD has said. A new referendum or a change of government leading to the UK staying within the EU would have a “significant” positive impact on growth, the OECD said.

 OECD also warned “no deal” would see investment seize up, the pound hit new lows and the UK's credit rating cut, and underlined that the outcome of the Brexit negotiations was hard to predict.

The Chancellor, Philip Hammond, said the UK would consider the Organization for Economic Co-operation and Development (OECD)'s report and act where it could.

At a press conference following the release of the report, Mr Hammond reiterated that companies in the UK and the European Union would benefit from the certainty of a limited transition period after Brexit.

He said: “[By] delivering a time-limited transition period, avoiding a disruptive cliff-edge exit from the EU, we can provide greater certainty for businesses up and down the UK, and across the European Union.”

OECD's secretary general, Angel Gurria, said that any future relationship with the European Union should be close: “It will be crucial the EU and the UK maintain the closest economic relationship possible.”

The organization's report highlights other challenges for the UK, including productivity and the growth of zero-hours contracts. It says rules should be tightened to restrict self employment to “truly independent entrepreneurs”.

But its most forceful language is on the subject of Brexit. As well as foreseeing a fall in the pound and a freezing of business investment, it says heightened price pressures would “choke off” private consumption.

It also says the current account deficit could be harder to finance, as a fall in the UK's credit rating could lead to higher interest rates to attract lenders from other countries.

The group also commented that UK productivity growth had come to a “standstill”, adding that the picture was weakest outside Greater London and the south east of England. It said that pattern “may lead to, or be the result of, important differences among people in terms of income and wealth, jobs and earnings, and education and skills”.

It said these “may have been one of the causes of Brexit, as less-educated workers in remote regions might have perceived to benefit less from the European project”.

OECD suggests the growing use of what it calls “non standard” forms of employment, including self-employment and zero-hours contracts, can be “detrimental” to the acquisition of skills and the job quality of low-skilled workers.

Categories: Politics, International.

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  • The Voice

    On the contrary Brexit seems to have boosted the British economy? There seems to be a continuing blizzard of unhelpful negativity from the remoaners. Great thats its being ignored.

    Oct 18th, 2017 - 08:33 am +1
  • Brit Bob

    Governor Bank of England 18 October

    This morning, BoE Governor Mark Carney discussed the risks of a hard Brexit during his testimony to the UK Parliamentary Treasury Committee. There was renewed weakness in Sterling during his testimony.

    Ironically, given the fall in Sterling, Carney explained why Europe’s financial sector is more at risk than the UK from a “hard” or “no-deal” Brexit. We wonder whether Juncker and Barnier appreciate the threat that a “no-deal” Brexit poses for the EU’s already fragile financial system?

    When asked does the European Council “get it” in terms of potential shocks to financial stability, Carney diplomatically commented that “a learning process is underway.” Having sounded alarm bells about clearing in his last Mansion House speech, he noted “These costs of fragmenting clearing, particularly clearing of interest rate swaps, would be born principally by the European real economy and they are considerable.”

    Calling into question the continuity of tens of thousands of derivative contracts, he stated that it was “pretty clear they will no longer be valid”, that this “could only be solved by both sides” and has been “underappreciated” by Europe. Moving on to the possibility that there might not be a transition period, Carney had a snipe at Europe for its lack of preparation “We are prepared as we should be for the possibility of a hard exit without any transition…there has been much less of that done in the European Union.”

    Maybe it’s Europe, not the UK, that needs the transition period most.

    Oct 18th, 2017 - 10:04 am +1
  • DemonTree

    @TV
    Brexit can't possibly have boosted the economy, because it hasn't happened yet. All the predictions about what it will do remain just that - predictions.

    The fall in the pound last year seems to have given the economy a temporary boost, but GDP growth figures for 2017 are pretty low compared to other G7 countries.

    Anyway, when they say productivity growth had come to a “standstill”, that is not the same thing as GDP growth. There is a nice report about it here:

    http://researchbriefings.files.parliament.uk/documents/SN06492/SN06492.pdf

    It shows productivity more or less stopped growing after the great recession and has still not regained its peak in 2007. And here is why that is a problem:

    ”Productivity – how much is produced for a given input (such as an hour’s work) – is directly linked to living standards, with a country’s ability to improve its standard of living over time almost entirely dependent on productivity growth.

    Productivity is also crucial in determining long-term growth rates of an economy. In other words, stronger productivity growth leads to stronger GDP growth. This, in turn, increases tax revenues and lowers government budget deficits. Of course, lower productivity growth
    results in the opposite: lower GDP growth and higher budget deficits.”

    And as the article says, differing levels of productivity in different parts of the country tend to lead to inequalities, which may well have contributed to the Brexit vote. It's something our government needs to sort out irrespective of Brexit, but they haven't managed to tackle it so far.

    Oct 18th, 2017 - 11:22 am +1
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