Lord O’Neill: Brexit Damage to UK Economy Could be ‘Dwarfed’ by Benefits of Strong Global Growth

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According to Lord O’Neill, the former Treasury minister and Goldman Sachs economist, the damage of Brexit to the economy of the United Kingdom could be “dwarfed” by the positive effect of other developments in the global economy.

“I share the views of many that Brexit is a really weird thing for the UK to impose on itself from an economic perspective,” Lord O’Neill informed the BBC.

“[But] maybe [better global growth] means the country’s going to be able to cope with Brexit better than certainly somebody like me might have thought some time ago.”

However, he emphasised that: “As important as Brexit is, it isn’t the most important thing facing Britain’s future.”

The International Monetary Fund projected that the global economy would grow by 3.7 percent in 2018, which would likely be the strongest expansion in seven years.

The two dominant advanced economic blocs of the world, the United States and the eurozone, are both simultaneously improving strongly for the first time since the global financial crisis, helping exports of the United Kingdom.

A report that was made by Cambridge Econometrics that was commissioned by the Mayor of London earlier in 2018 projected the growth of the United Kingdom to be 3 percent lower by 2030 compared to what it would have been if Britain remained within the single market and customs union of the European Union.

“If that’s the worst that Brexit will deliver, then I wouldn’t worry about it,” said Lord O’Neill.

“My own view is if we go for a really hard Brexit or a no-deal Brexit, we’ll probably suffer more than that 3 per cent. But if it is only 3 per cent, [with] what’s going on with the rest of the world helping us and with productivity improving, that will easily dwarf a 3 per cent hit over 13 years, easily.”

Lord O’Neill was previously the chair of Goldman Sachs Asset Management. In 2015, he joined the Treasury to work on the Northern Powerhouse project of George Osborne. He was also optimistic regarding regional rebalancing.

“I certainly wouldn’t have thought the UK economy would be as robust as it currently seems [a few years ago],” said Lord O’Neill.

“That is because some parts of the country, led by the North-west, are actually doing way better than people seem to realise or appreciate.”

“As well as this crucial fact, the rest of the world is also doing way better than many people would have thought a year ago, so it makes it easier for the UK.”

The economy of the United Kingdom is estimated to have grown by about 1.6 to 1.7 percent over last year, and growth is anticipated to slow to 1.4 percent this year by the Office for Budget Responsibility.

Lord O’Neill dropped the idea that if the economy of the United Kingdom does hold up reasonably well in the following years, it will be actually because of Brexit itself, instated of other factors.

“Brexiteers are going to be like the cat with the cream. They’re like ‘there you go, told you so’, which of course is ridiculous,” said Lord O’Neill.

In 2015, Lord O’Neill was given a life peerage in 2015. In September 2016, he resigned from the Treasury, having previously indicated concerns that the new administration of Prime Minister Theresa May was not fully committed to the Northern Powerhouse.