Britain’s leave-voting areas are falling even further behind three years after Brexit. Our Levelling Up Scorecard shows how they are far more likely to face a widening wealth and opportunity gap relative to richer regions. The cost for the economy at large is about £100 billion a year.
That’s an excerpt from a Bloomberg Close email I received in January 2023. It was accompanied by the following graph:
It looks like a smoking gun. The dark line shows what happened to UK GDP after the June 2016 Brexit vote. The light line is the ‘counterfactual’ — what would have happened had the UK instead voted to remain. The gap seems to be about £25 billion per quarter, which tallies up with the email’s claim of £100 billion per year. Being a strong remainer, I wanted to shout this from the rooftops. Let’s all laugh at those leave-voting areas who didn’t listen to us clever remainers and made themselves worse.
Confirmation bias means that we need to scrutinise studies we like just as closely as those we don’t. And this is particularly the case for papers claiming what would have happened if a particular event had not taken place. Research can study what actually happened, like the link between a company’s actual diversity and its actual performance — while it’s hard to show causation, you at least have a correlation. But it’s much harder to study what would have happened in a parallel universe where there was no Brexit. Nobody ever sees what might have been.
So for any such study, we need to scrutinise how the researchers estimated the counterfactual. Clicking on the second link in the email takes you to an article titled ‘Brexit is Costing the UK £100 Billion a Year in Lost Output’, It suggests that the researchers tracked how the other G7 countries (Canada, France, Germany, Italy, Japan, and the US) fared after June 2016 and assumed that the UK would have performed in-line with the G7 average.* By the end of 2022, there was a gap of £25 billion per quarter, and Bloomberg’s explanation was Brexit.
But my TED talk highlighted how, even if we like the story being peddled, we need to consider rival theories. What might one be? Looking at the graph for just a second longer, we see that the lines were virtually identical for the first three and a half years. The gap only opened up when COVID broke out at the start of 2020. It could have been caused by the UK being hit harder by COVID, rather than Brexit. The counterfactual was misleading — even if the UK had voted remain, it wouldn’t have performed in line with the G7 due to coronavirus. That the pandemic started in early 2020 should have been etched in every reader’s mind, but we don’t even consider the rival theory if we like the narrative being told.
This is an example of why a fact is not data. It’s a true fact that the UK voted for Brexit, and it’s a true fact that the UK underperformed the G7 by the end of 2022. But a single example is never enough to draw a conclusion as there are a ton of rival theories. What you’d need is large-scale data — many countries that left an economic or political union, and how they fared on average afterwards.
* More precisely, the researchers estimated the historic (pre-Brexit) link between GDP growth in the UK, and in the rest of the G7. For example, if the UK historically grew by 0.9% for every 1% that the rest of the G7 grew pre-Brexit, and the rest of the G7 grew by 2% after Brexit, they assumed the UK would have grown by 1.8%.
