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Will Brexit Raise the Cost of Living?

Author

Listed:
  • Stephen Clarke
  • Ilona Serwicka
  • L. Alan Winters

Abstract

This paper considers two aspects of this question. First, Brexit has already induced a devaluation of sterling of around 14 per cent since June 2016, which has started to work through to consumer prices: between June 2016 and July 2017 consumer prices increased by around 2.5 per cent. Second, while it is not government policy, nor the desire of the UK public, that the outcome of negotiations is a ‘MFN Brexit’, this remains a distinct possibility. Thus we ask how the imposition of tariffs on imports from the EU will work through into consumer prices. Making very conservative assumptions, we conclude that ‘MFN Brexit’ will increase the average cost of living by around 1 per cent and increase it for 8 per cent of households by 2 per cent or more. We present results for different groups of households according to their employment and structural characteristics and show that the impact will generally be largest on unemployed, single parent and pensioner households.

Suggested Citation

  • Stephen Clarke & Ilona Serwicka & L. Alan Winters, 2017. "Will Brexit Raise the Cost of Living?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 242(1), pages 37-50, November.
    • Handle: RePEc:sae:niesru:v:242:y:2017:i:1:p:r37-r50
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    Citations

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    Cited by:

    1. Catherine Mathieu, 2020. "Brexit: what economic impacts does the literature anticipate?," Post-Print hal-03403036, HAL.
    2. Catherine Mathieu, 2020. "Brexit: what economic impacts does the literature anticipate?," SciencePo Working papers Main hal-03403036, HAL.
    3. repec:hal:spmain:info:hdl:2441/2jt9boop748r0ql0k1lmshm5ou is not listed on IDEAS
    4. repec:spo:wpmain:info:hdl:2441/2jt9boop748r0ql0k1lmshm5ou is not listed on IDEAS
    5. Nogues, Julio, 2018. "Brexit trade impacts and Mercosur's negotiations with Europe," MPRA Paper 87416, University Library of Munich, Germany.

    More about this item

    Keywords

    Brexit; consumption; international trade; tariffs; partial equilibrium model;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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