Bloomberg Debunks the NBER 8%

Bloomberg published two separate articles on the same topic, with slightly different detail and context included between the two articles, but both focused on the same research. The first article, entitled "How the UK’s Options for Rebuilding Ties With Europe Stack Up" laid out the basic findings of the analysis by Bloomberg Economics - that it was their belief that a central estimate of a long term impact of 2.5% of GDP had been dealt by the UK leaving the EU, and that less than half of that could be recovered by getting closer to the EU again.

The real gem of these articles however, is what they say about the much-repeated NBER 8% of GDP figure - that the estimate is misleading as it uses both Ireland and the USA in the doppelganger model, both of which are unfair comparisons that provide junk modelling. When this (what must have been intentional) mistake is corrected for, and a more realistic and fair set of comparison countries used, the result was a long-term impact of 2.5% of GDP.

The first article also models out the UK rejoining the EU Customs Union - and shows it adding less to long-term UK GDP than the new trade deals that the UK would have to sacrifice in order to rejoin it. So basically demonstrates that joining the EU Customs Union would be a stupid idea.

Ultimately the articles suggest that a closer relationship with the EU could generate no more than an extra £14 Billion per year in long-term GDP increases, but that this would come with a cost of membership contributions, which we can safely say with the doubling of the EU budget would be larger than any gains.

So it was likely not their intention, but the Bloomberg article succeeds in the following:

• Adding further weight behind the argument that both the OBR and the NBER long-term forecasts are too high, the NBER one ridiculously so
• That joining the EU Customs Union, though not actually even an option on the table, would not be worth doing
• That even the most aggressive realignment would cost more than it could possibly add to the British economy

So thank you Bloomberg, for all your hard work.

• Bloomberg article, "Brexit: What Rolling Back Vote Would Mean For The UK Economy" - Click Here to Read
• Bloomberg article, "How the UK's Options For Rebuilding Ties With The EU Stack Up" - Click Here to Read