Project fear or project fact – well, a bit of both really

This is a fair and balanced piece from Although it doesn’t mention the £60 billion borrowed by the Bank of England and pumped into the economy in the form of quantitive easing. Without that it is likely that the more dire predictions of HM Treasury are more likely to have happened. Brexiteers are very quick to condemn the BoE for interfering when it doesn’t suit them, but you’ll notice they never mention this particular fact when discussing how the economy is doing better than the Treasury predicted.

In May 2016, then-Chancellor of the Exchequer George Osborne told us that “a vote to leave would represent an immediate and profound shock to our economy.” According to analysis from HM Treasury, that shock “would push our economy into a recession and lead to an increase in unemployment of around 500,000, GDP would be 3.6% smaller, average real wages would be lower, inflation higher, sterling weaker, house prices would be hit and public borrowing would rise compared with a vote to remain.”

This was the Treasury’s assessment of the short-term impact of the vote – i.e. after the vote, but before we actually left the EU. [ Editior’s comment: To be fair, PM David Cameron did state that he would invoke Article 50 on the day of the referendum being won, with no planning or preparation. So the Treasury’s forecasts would have reflected this] The long-term economic impact of leaving had been set out in five weeks prior in another document, which predicted that “Britain would be permanently poorer by the equivalent of £4,300 per household by 2030 and every year thereafter.”

But how has the UK economy actually performed since the vote to leave?


It is true that UK GDP growth has slowed since the crisis, although a recession (classed as two or more successive quarters of negative growth) has failed to materialise. According to statistics from the ONS, the UK economy grew at an annualised rate of 1.5% in the third quarter of 2018. Such a rate of growth is relatively pedestrian when set against the UK’s long-term average of around 2.5%, and it also puts the UK towards the bottom end of the growth league of the G7 industrialised nations. Prior to the referendum in the years 2013-2016, UK growth was among the strongest in the G7.

Real Wages

The Treasury predicted that average real wages would be 2.8-4% lower by 2018. In fact, real wages have hardly budged since the time of the referendum, although real wage growth did turn negative for a while in 2017 as inflation – driven higher by the devaluation of the pound since the Brexit vote – outstripped nominal earnings growth. Real wages have recently begun to rise again after UK wage growth rose to its fastest pace in nearly 10 years in the three months to August. Pay rose by 3.1% in the three months to August, compared with a year ago, while inflation for the same period was 2.5%.


Unemployment is one area of economic performance where the reality stands in stark contrast to the Treasury’s predictions before the Brexit vote. The Treasury expected a Leave vote to lead to an increase in unemployment of between 520,000 and 820,000, adding 1.6-2.4 percentage points to the official unemployment rate. However, unemployment has actually continued to fall since the vote, from 5% in June-August 2016 to a current reading of just 4.1%, reducing the number of unemployed people by around 400,000.

The pound

Prior to the Brexit referendum the pound was trading at 1.44 against the dollar. At time of writing, it is currently trading at 1.27, giving a fall of just under 12% – almost exactly in-line with Treasury analysis before the vote. Whilst this has obviously been a significant contributor to the rise in inflation over the past couple of years (as foreign goods have become more expensive to UK consumers), it has also helped to propel UK exports to new highs (as UK products become cheaper overseas). Overall, UK exports of goods and services are now at a record high.


Inflation has risen sharply since the referendum, from 0.4% in June 2016 to a five-year high of 3.1% in November 2017. However, it has since fallen back to 2.3% (November 2018). Once again, the 2.7% spike from June 2016 to November 2017 was almost in line with Treasury forecasts. The future trajectory of inflation will depend on what kind of deal (if any) the UK agrees with the EU and how its trade relations with the rest of the world develop post-Brexit. For example, while it is expected that tariffs will make goods imported from the EU more expensive to UK consumers, the potential reduction or elimination of tariffs on goods imported from non-EU countries could reduce UK prices for the latter.

House prices

According to research from estate agent Emoov, average monthly house price growth since the referendum is 0.26%, slower than the 0.33% a month on average in the months following the economic crash of 2007 while prices recovered to their pre-crash peak. Although the Brexit vote appears to have slowed the rate of house price inflation, this is a far cry from the Treasury’s predictions of a 10% fall. However, some regions have been impacted more than others, with central London seeing large falls as foreign buyers reappraise their UK exposure.

Public borrowing

The UK budget deficit – the amount the government has to borrow in order to make ends meet – has continued to fall despite the vote to leave the EU. From £75.5 billion in 2015/16, the deficit fell to £47.1 billion in 2016/17 and £40.7 billion in 2017/18. It is forecast to fall again, to £25.5 billion, in 2018/19. Treasury predictions envisaged an extra £24 billion in borrowing for the 2017/18 fiscal year. While it is impossible to know the path that the deficit would have taken in the event of a vote to remain, the fact that the deficit has continued to fall – in spite of less fiscal restraint on the part of Chancellor Hammond versus his predecessor, George Osborne – suggests that the fiscal impact of Brexit, up to now at least, has been relatively muted.

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