Here's his thread in response to a tweet noting how Brexit economic forecasts tend to have lower GDP from lower immigration (i.e. a smaller population) and does not amount to lost GDP per capita.
1/ Precisely. I have looked at lots of Brexit economic models and in all a significant proportion of the forecast loss of GDP growth has come from lower immigration numbers
2/ For example, if we look at NIESR’s recent forecasts made for the People’s Vote
3/ It estimates that, on a Managed No Deal basis, UK GDP will be 5.5% lower by 2030 than it would have been had we stayed in the EU.
4/ However, its forecast for GDP per capita is only 3.7% lower - thus 1.8% of the lower growth comes from forecasts for lower immigration alone.
5/ NIESR informed me that the single biggest factor in the 5.5% (lower GDP) figure was their forecast for lower productivity from leaving the EU - the impact of lower productivity alone represents 3% of the 5.5% forecast decline.
6/ This means that just two variables – lower productivity and lower immigration are responsible for 4.8% of the lower growth forecast.
7/ Or look at it another way – the forecast for the loss in GDP driven only by the loss of single market and customs union access / increased friction is only 0.7%.
8/ This figure is logical as it broadly equates to the 1.0% GDP gain that the Bertelsmann Stiftung estimates the UK has gained from single market and customs union membership.
9/ Another example of this is Panmure Gordon’s model which forecasts UK GDP to be c.5% lower in 2030 than previous pre-Brexit forecasts.
10/ Simon French, chief economist of Panmure Gordon stated "This mainly hinges on a reduction in long-term net migration to 105,000 a year and sustained trade diversion through non-tariff barrier differentiation and heightened administrative burdens from a loss of customs union."
11/ What I think this illustrates is that the actual “guaranteed” economic effect from leaving the single market and customs union – the limited but nevertheless real increased trading friction and unwinding of some supply chains etc- is actually minimal. 1-2% at most.
12/ The rest of the forecast decline is a matter for future policy decisions
13/ For example. Immigration - lower immigration may well be a function of the Brexit vote but it is not a necessity of it. The British people may decide that lower growth is a price that they are prepared to pay for less migration.
14/ Or they may decide in a few years that now the UK has control of the numbers and can determine the type of immigration by skills rather than geography they are content with higher numbers.
15/ And as for Productivity. UK productivity is currently c.25% below the best of our G7 peers. (Link: ONS data)
16/ Leaving the EU and being able to make our own rules and regulations, trade policies etc will enable the UK to focus on policies designed to improve productivity and hence economic growth.
17/ Indeed, if we look only at AI & Robotics if the UK get's policies right here alone the effect would be huge especially as UK only just behind China & the US according to the Big Innovation Centre and Deep Knowledge Analytics report.
18/ In his October 2017 Government report, Professor Juergen Maier estimated that the “Fourth industrial revolution” could add over £455bn to the UK economy and create over 175,000 jobs if implemented correctly.
19/ PWC in its June 2017 report estimated that UK GDP will be up to 10.3% higher in 2030 as a result of AI – the equivalent of an additional £232bn.
20/ Accenture and Frontline Economics in their 2016 report estimate that AI will boost the UK economy by at least 1.4% by 2035
21/ The long-term economic impact caused by the additional trading friction from leaving the single market and customs union is not large (1-2%). Much more significant are the opportunities to the UK of getting our policy framework right as an independent state.
High immigration numbers may add to GDP but any immigrant earning less than £30K will be a net negative to the economy due to in work benefits claims although they will be good for individual business so higher low skilled immigration could be impacting the economy negatively
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