Brexit ‘hitting hardest’ after
WALES has suffered the worst spike in inflation in Great Britain as a result of last year’s vote for Brexit, according to new research from the London School of Economics.
The analysis by its Centre for Economic Performance found London was the least affected region and that the rise in inflation in the UK capital was 0.35 points below the UK average. In contrast, the increase in inflation in Wales was 0.21 points higher than average.
The findings will intensify concerns as Wednesday’s Budget looms about the impact of Brexit on living costs in the most deprived parts of the country.
The researchers state: “The impact of the referendum is equivalent to a £448 cut in annual pay for the average worker. Put another way, the Brexit vote has cost the average worker almost one week’s wages due to higher prices.”
Northern Ireland was the worst affected part of the UK, where the rise in inflation was 0.47 points higher than average.
The analysts studied the impact of the fall in the value of the pound in the wake of the Brexit vote and concluded that the “average household £7.74 per week through higher prices” – the equivalent of £404 a year.
They state: “Our research provides the first detailed analysis of how the referendum outcome has affected inflation, real wages and living standards in the UK. We find that following the referendum, prices increased more in product groups where imports account for a higher proportion of consumer expenditure.
“Our baseline estimate is that the Brexit vote increased inflation and decreased real wage growth by 1.7 percentage points during the year to June 2017... [Our] results provide compelling evidence that UK households are already paying an economic price for voting to leave the EU.”
Products hit by inflation include bread and cereals; milk, cheese and eggs; coffee, tea and cocoa; beer; wine; furniture and furnishings; and jewellery, clocks and watches.
Dr Thomas Sampson, a co-author of the report – which was supported by the UK in a Changing Europe initiative – said: “Our research is not a Brexit forecast. It is about the costs of Brexit that have already materialised. The results show that living standards in the UK have already suffered. Households all across the country are hit by higher inflation – without matching pay rises.
“The increase in inflation can be directly traced back to last year’s referendum when the sterling exchange rate dropped sharply.”
He said that in Wales the cost of higher prices works out at £7.09 per week or £369 per year. Although this is lower than the UK average of £7.74, the poorer conditions in Wales mean people “lose more in proportional terms”.
A spokesman for Ukip in Wales said the report showed why the UK should get “out of the EU at the earliest opportunity”.
He said: “There must be no transitional period. Economic uncertainty will be reduced by embracing the 85% of the global economy outside the EU and getting out now.
“The Government should focus on developing trade deals with our historical partners in the Commonwealth and the United States, many of whom have expressed their desire to make a deal at the earliest opportunity.“
But Plaid Cymru Treasury spokesman Jonathan Edwards took a very different view, saying: “This analysis sadly confirms that it is the public who are paying the price for the needlessly reckless approach to Brexit, taken by the British Government.
“People are paying the price not only through depressed wages but also through the increased cost of living since the Brexit vote.
“Once again, Wales, and Welsh citizens, are some of the worst off with the rise in inflation higher in Wales than in both Scotland and England.
“This stresses the importance of Plaid Cymru’s efforts to make sure Wales has a voice in these Brexit negotiations – we are more exposed than the other countries in the UK with our export-led economy and our close trading relations with the EU.
“It also underlines the importance of maintaining our membership of the Single Market and the Customs Union, to protect people’s jobs and wages.”