Britain’s exit from the European Union — Brexit — could undo all the progress it has made becoming one of the world’s most competitive countries, according to the World Economic Forum.
Every year the WEF’s benchmark Global Competitiveness Report ranks countries on how competitive their economies are.
WEF looks at data on areas as varied as the soundness of banks to the sophistication of businesses in each country to compile a picture of the economy.
Countries were ranked according to the “12 pillars of competitiveness,” which includes macro-economic environment, infrastructure, health and primary education, and labour market efficiency.
For the year 2016-2017, the prestigious institution outlined how the UK has risen up the overall Global Competitiveness Index by three positions hitting 7th place.
However, it warned that Britain’s score was calculated based on pre-Brexit data and therefore the true effects from Britain leaving the EU have not been taken into consideration.
“Our analysis suggests there is more downside risk from Brexit than there is upside when it comes to the competitiveness of the UK economy,” said WEF in a statement sent to Business Insider.
Britain voted to leave the EU on June 23. Since then, the Sterling has hit 30-year lows, the Bank of England has implemented a range of stimulus measures including lowering rates to 0.25% to encourage spending and borrowing, and a number of agencies have revised down UK GDP projections.
WEF said there are three uncertain areas for Britain that could affect the economy’s competitiveness. “We regard these as uncertain because the direct impact could either be negative or positive:”
1. Effectiveness of anti-monopoly policy
— WEF points out that the “UK already has an effective anti-trust regime, although so does the EU, so any impact is likely to be quite small.” Only time will tell if Britain can successfully forge ahead with this without the help of the EU.
Agricultural policy costs — Some 40% of the EU budget, worth €58 billion (£50.3 billion, $65.2 billion) a year, is spent on the agricultural policy.
WEF said that if the UK leaves the EU, “on paper it [looks like it] could be a big saving” for Britain because it would not have to contribute to the EU budget.
However, it warned that “the UK government has said it will match the subsidies,” meaning that if UK farmers receive a subsidy from a collective fund from the EU, the UK will now have to stump up the costs itself, without any outside help.
3. Exports — This is perhaps the most uncertain of all the fields as the UK has yet to trigger Article 50. No one has any idea what a Brexit will look like and what impact this will have on trade rates and laws.
WEF notes that “it is very hard to say” what the overall impact would be. “Brexit may have the effect of reducing exports if access to traditional export markets becomes harder, however the depreciation of the pound serves as an automatic stabilizer that may help counterbalance this effect,” it added.
And these factors aren’t the only ones that adding to the uncertainty. WEF said that “given that the pillars are interconnected, this analysis misses out on the indirect effects, which can be substantial.”
“Brexit poses a considerable risk to the UK’s competitiveness: of the 112 indicators that make up a country’s competitiveness profile, we identify 14 that could be directly negatively impacted by Brexit and only 2 that could be directly positively impacted,” said WEF in a statement.
“We identify three other indicators where Brexit could have uncertain direct impact. Of the 14 indicators that could have a direct negative impact, the UK tends to do better currently than either Norway or Switzerland,” the group said.
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