Oliver Mangan: Brexit is rapidly turning Britain into an economic laggard

UK exports in the third quarter were almost 15% below their levels of three years earlier while Eurozone exports have risen back above their levels 

The British economy has slumped since Brexit became a reality, going from the strongest to the weakest of the G7 members.

The recoveries in the UK and US economies have lost considerable momentum since the middle of the year.

GDP growth slowed to 1.3% in the UK in the third quarter, down from 5.5% in the previous quarter. A marked deceleration was expected after output rebounded sharply in the second quarter when the economy reopened, but not on this scale.

A sharp rise in Covid case numbers over the summer, as well as disruptions to supply chains and labour shortages, have impeded the recovery recently.

Similar factors were at work in the US in quarter three, with growth slowing to 0.5% from 1.9% and 1.8% in the first two quarters of the year respectively. 

It is expected that US growth will accelerate sharply again in this quarter, with a strong employment report for October already out.

The likelihood is that growth will slow further in the UK, with the Bank of England projecting GDP will rise by around 1% in quarter four.

The pace of recovery in the eurozone was maintained in the third quarter, with GDP increasing by 2.2%; exports are performing very well this year. 

Covid case numbers remained low until recently in the EU, while labour market constraints are not as evident as elsewhere.

Growth, though, is set to slow sharply in the final quarter of the year, with the rise in Covid cases and supply chain disruptions taking more of a toll on activity.

A more complete picture of the major economies is provided by assessing where they stand now relative to their pre-Covid levels of GDP. 

In this regard, the UK is a laggard, with GDP some 2% below its end of 2019 level.

US GDP is 1.4% above its pre-pandemic peak. In the eurozone, GDP is back to within 0.5% of its end of 2019 level.

This is a disappointing performance by the UK, given the relatively high level of fiscal support provided for the economy.

A notable feature of third-quarter UK GDP data was the sluggishness of exports, which fell by 2%.

While pandemic-related issues and supply chain disruptions are no doubt impacting trade, it would seem that Brexit is also a key factor.

UK exports in the third quarter were almost 15% below their levels of three years earlier. Eurozone exports have risen back above their levels of three years ago.

The UK was the best performing of the G7 economies ahead of the Brexit referendum. Post-Brexit, though, it has slipped to the bottom of the table.

Hardly a strong base to risk starting a trade war with your biggest trading partner.

• Oliver Mangan is chief economist at AIB