Market news

1 April 2019

Brexit has cost the UK nearly 2.5 percent of GDP - Goldman Sachs

Goldman Sachs' (GS) economists said on Monday their estimates revealed that the UK's economy has lost nearly 2.5 percent of GDP relative to its growth path prior to the mid-2016 referendum on exiting the European Union (EU), and has lagged other advanced economies as uncertainty dents investment.

"Politicians in the UK are still struggling to deliver on that vote," Goldman Sachs' economists wrote in a note to clients. "The resulting uncertainty over the future political and economic relationship with the EU has had real costs for the UK economy, which have spilled over to other economies," they added.

The U.S. bank's economists also noted that Brexit uncertainty has been a major driver of economic output losses as they are concentrated in investment.

"Uncertainty shocks weighed on investment growth in the immediate aftermath of the Brexit vote, as well as more recently amid the renewed intensification of Brexit uncertainty," they wrote.

In addition, their model finds the Brexit cost stood at around 600 million pounds per week since the referendum.

In a no-deal Brexit, a scenario Goldman's economists see a 15-percent probability of, the UK would see large output losses with a "substantial" global confidence shock marked by sharp sterling depreciation.

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