Brexit is driving inflation higher in the UK than its European peers | Peterson Institute for International Economics
“By ending the free movement of EU migrant workers to the UK, the British government has unilaterally cut the labor supply and its elasticity. By adding new tariff and non-tariff trade barriers, the government has slashed purchasing power and available imports and it has created inflation during the staggered implementation of the Brexit deal. By creating uncertainty about UK economic policy and investment prospects, Brexit has weakened the anchor for inflation expectations.”
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Many high-income economies are suffering 40-year highs in inflation. They all have faced the same series of major supply shocks to their economies simultaneously: reopening of the economy after the first wave of the COVID-19 pandemic in spring 2021, global supply chain disruptions for critical goods throughout the last 18 months, and energy and food price shocks caused by Russia’s invasion of …
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