British economy 5pc smaller because of Brexit, claims Goldman Sachs
Other economists said Goldman’s estimate exaggerated the impact of leaving the EU and laid the blame for underperformance at the door of the Bank of England, rather than Brexit.
Mr Moberly and Mr Jari Stehn also noted that in some areas, such as trade in services, the economy has performed better than expected.
The bank’s Brexit forecasts have in the past proved misguided. Goldman Sachs predicted the UK would fall into a recession if it left the EU at the time of the referendum, a fate which the economy ultimately avoided.
In the new investment note sent to clients last week, Goldman Sachs said the cost of living had jumped by 31pc in the UK since the vote to leave the EU. This is worse than the 27pc increase seen over the same period in the US and the 24pc rise in the eurozone.
Mr Moberly and Mr Jari Stehn said trade in goods had fallen since the Brexit vote, even as it rose across G7 countries on average. At the same time, “investment growth stalled after the referendum, falling significantly below its pre-2016 trend.”
Changes in immigration since Brexit have also hit the economy, the pair argued. Although overall migration has jumped since Brexit, “many recent arrivals are students, meaning that immigration may be playing less of a role in boosting labour supply than the headline numbers suggest”, they wrote.
“EU immigrants tended to have high labour market participation rates, as many of them entered the UK specifically to work.”