Economy

Brexit Has Left the UK Economy 5.5% Smaller, Researcher Says

Published

2 years ago

December 22, 2022

(Bloomberg) — Brexit has left the UK economy 5.5% smaller than it would have been and added to the squeeze on public services that’s behind strikes crippling the railways and National Health Service, a prominent research group concluded.

The Center for European Reform said that slower growth is also weighing on the Treasury’s revenue and that the tax increases announced in the autumn fiscal statement wouldn’t be necessary if the UK were still in the European Union’s common market.

The findings are the latest to highlight the costs of Brexit, which are limiting Prime Minister Rishi Sunak’s effort to pull the UK economy out of a recession that may last until the next election. Sunak is holding firm in his determination to limit pay increases for nurses, ambulance drivers and railway staff, who are walking off the job in protest.

“The Brexit hit has inevitably led to tax rises, because a slower-growing economy requires higher taxation to fund public services and benefits,” John Springford, deputy director of the CER, said in the report.

The CER said departing the EU single market reduced investment by 11% and goods trade by 7% in the second quarter of 2022. That has contributed to Britain trailing behind almost all other major economies since the end of the pandemic.

His comments follow assertions from Michael Saunders, a former Bank of England policy maker, who said that without Brexit, “we probably wouldn’t be talking about an austerity budget — the need for tax rises, spending cuts wouldn’t be there.”

Springford said that had the UK economy grown in line with his model, tax revenues would have been about £40 billion higher on an annual basis, lessening the need for the £46 billion tax hikes announced by Chancellor of the Exchequer Jeremy Hunt in mid-November.

Instead, government borrowing in November was almost triple the level of a year ago and well above the rate economists had expected, according to official figures released Wednesday.

The shortfall in the first eight months of the fiscal year climbed to £105 billion, the fourth highest on record. The Office for Budget Responsibility expects the total to reach £177 billion for the full 12 months.

The CER used an algorithm that draws on the economic performance of 22 other countries that were closely matched to the UK pre-Brexit. It used this to create a hypothetical model — a ‘doppelgänger’ — to show the economic trajectory of the UK had the country not departed the EU.

Springford said that the UK had not suffered a greater economic impact from Covid than other countries, making the Brexit effect easier to distill.

“As measured by excess deaths through the pandemic, Britain ranked in mid-table globally,” he said. “So there’s little reason to believe the long-term scars on the economy are larger than in other countries, on average.”

The report said that services trade was around the same under both scenarios, indicating the smoother transition of firms within this sector.

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(Updates with quote in final paragraph. Previous version was corrected to fix spelling of a name.)

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

3 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

7 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

1 week ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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