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Research theme 3: Brexit, UK Economic Growth and the British Model of Capitalism

Theme 3 - Brexit, UK Economic Growth and the British model of Capitalism

A process of political economic transition as significant as Brexit clearly has major implications for the nature and future trajectory of the British model of capitalism. How will Brexit reshape Britain’s growth model?

What approach to trade relations, economic regulation and so on will be written into Britain’s new relationship with Europe and the wider world?

The project will unearth the vision of the role and potentialities of the state within the British model of capitalism that comes to underpin the UK government’s approach to navigating the protracted Brexit negotiation and adjustment process which, studies indicate, may last for many years.

It will assess the impact of Brexit on the UK economy’s productivity and growth potential. In the process, it will assess what role the UK state can play in boosting Britain’s economic competitiveness.

The analysis will focus on how these visions for the future of British capitalism get translated into fiscal targets, and growth forecasts framing economic policy. What economic ideas and thinking underpins ways of assessing future growth, and post-Brexit views of UK economic policy possibilities.

The historical UK growth path over many decades has been between 2-2.5%. When the Global Financial Crisis hit in 2007-8, UK growth dipped below that trend. Economists expected a swift recovery to the historical trend. Over a decade on, the return to trend has not materialised. Forecasters are not clear why. Following the Brexit referendum – UK growth has dipped further, as levels of uncertainty surrounding the UK economy, and economic growth have increased further.

Key Questions

  • How will Brexit change the UK economy’s structure and performance?
  • Through what channels and mechanisms will Brexit affect UK
    productivity and growth potential?
  • Increased barriers to trade, and reduced migration will likely adversely levels of productivity, and potential UK growth.
  • Increased uncertainty also adversely effects things like business investment which have knock on effects on productivity.
  • Debate surrounds the scale and size of these impacts - will there be one off 'static' effects, or long-term, ongoing 'dynamic' impacts of reduced trade openness on UK productivity?