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Research themes: Brexit & the Politics of British Capitalism

Some specific research questions

Q1: What will be the impact of Brexit on 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.

Q2: How did the global financial crisis alter the UK’s growth trajectory?

A decade on, policy-makers are still getting to grips with how hard the 2007-8 crisis hit the UK economy and its growth potential and trajectory. What assumptions does the OBR make about effects of government policy (and shocks like the global financial crisis, or Brexit) on actual and potential growth?

Q3: To what extent are the economic concepts, used by the OBR to frame and pilot economic policy, political constructions?

This project will explore how far economic forecasts are grounded in firm evidence and unquestioned scientific methodologies, or if they are in fact based on contested methods, bedevilled by uncertainties, and subject to substantial retrospective revisions. Are Government policy options opened up or closed off by particular renderings of Britain’s growth trajectory and their assumptive foundations (notably about Brexit effects)?

Q4: What impact will Brexit have on taxing, spending, austerity and UK economic policy?

Growth forecasts crucially mediate the politics of austerity through their implications for the tax take, and in assumptions they make about effects of government policy (and shocks like the GFC or Brexit) on actual and potential growth. How will Brexit affect taxing, spending and UK economic policy? It will have both a short term and a long term impact on UK growth rates and potential growth rates. These in turn shape the path of the public finances. If the economy is smaller (larger) and and growing more slowly (quickly) it affects the amount of money available for public expenditure.

Q5: How can the OBR gauge Brexit’s impact on UK growth and the economy in the context of pervasive uncertainty?

The impacts of Brexit on potential output, investment, trade, FDI and productivity will remain highly uncertain, even in hindsight. The judgement of prospective path for potential output is always surrounded by 'considerable uncertainty', to which 'uncertainties associated with the UK’s exit from the EU are likely to add’. The project assesses the strengths and weaknesses of each growth evaluation approach, paying particular attention to the assumptions they make, how uncertainty is taken into account.