Search

Brexit implies that the UK may move to different rules to control state aid, although changes will be minimal if it remains within the EEA and could be minor in the event of an EU/UK trade agreement. With a 'hard' Brexit, there could be much greater scope for selective industrial policy and that might be seductive to a government intent on a new industrial strategy. In this case, however, the risks of 'government failure' are considerable and it would be desirable to devise an institutional framework that strictly limits the scope for politicians to exercise discretion. [ABSTRACT FROM AUTHOR]

The relatively deep level of economic integration achieved by the European Union ( EU) has been highly successful in increasing trade for its members. Larger trade volumes have had positive effects on productivity levels. In the case of the United Kingdom the gain from joining the EU was probably around 10 per cent of GDP and this far exceeded any costs of membership, possibly by a ratio of seven to one. A major reason for this outcome was a significant increase in competition as protectionism was abandoned. The economic implications of Brexit are much less clear because there are many permutations of what it would entail. Future trade barriers rather than budgetary transfers are the main issue. Brexit could be quite costly if the UK left the single market and used its new policy space badly. Ironically, while Brexit clearly appeals to free traders, it could end up empowering protectionists. [ABSTRACT FROM AUTHOR]