Jonathan Portes's picture
Affiliation: 
National Institute of Economic and Social Research
Credentials: 
Director

Voting history

Brexit: the potential of a financial catastrophe and long-term consequences for the UK financial sector

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Question 3: What do you think will be the overall economic consequences of Brexit for the UK?

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Answer:
Mildly negative
Confidence level:
Not confident
Comment:
Economists agree that trade, migration and access to large markets are good for economies. EU membership has led to a relatively liberal approach to both and provides full access to the largest single market in the world. If this could be maintained outside the EU and better trade deals negotiated, then the economic impact might indeed be neutral or even a slight positive. But this would require benign political and economic developments in the UK, in the EU, and globally. Moreover, the potential downside risks of a decision to leave, while not susceptible to precise quantification, appear large, and need to be taken into account in assessing the overall costs and benefits. Risks are also attached to remaining in the EU, but appear easier to manage.

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Question 2: What is the probability that the UK experiences such a significant disruption to financial markets and asset prices following a vote for Brexit on 23 June?

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Answer:
11-30%
Confidence level:
Confident
Comment:
There would certainly be considerable market volatility. I am reasonably confident that the authorities have contingency plans in place, and the appropriate tools, to deal with the most adverse possible impacts (eg a loss of liquidity in certain markets). However, it is certainly possible, if not probable, that volatility would be such as to result in significant (not in my view catastrophic) negative short-term economic impacts.

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Question 1: Do you agree that there would be substantial negative long-term consequences for the UK financial sector if the UK were to leave the EU?

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Answer:
Agree
Confidence level:
Not confident
Comment:
There is considerable uncertainty: and, whichever way the referendum goes, specifying the counterfactual will be close to impossible. However, the arguments set out in Armstrong (2016) are convincing, in particular the loss of the UK's current privileged access to the financial infrastructure of the eurozone.

National Living Wage and the UK economy

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Question 2: Do you agree that the new NLW will have a muted effect on wages and prices?

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Answer:
Agree
Confidence level:
Very confident
Comment:
It will have a significant impact on wages for some workers and hence some companies. But the overall macro-level impact on wages and prices will be relatively small. Firms and sectors will adjust through a variety of mechanisms, one of which may be higher prices, but even in the retail sector the impact on consumer prices will be quite difficult to discern.

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Question 1: Do you agree that the new National Living Wage is likely to lead to significantly lower employment?

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Answer:
Agree
Confidence level:
Confident
Comment:
In my view, the main thing we have learned from the considerable body of research on the impacts of minimum wages is that ex ante predictions based on theory or prejudice are worth little - those who predicted large negative impacts of the UK NMW now look foolish. Impacts are context dependent - it depends on time and place, as well as of course level. So I think anyone who states with very high confidence that they know what the impacts of the substantial increases now planned will be is mistaken. It will depend crucially on wider economic and labour market developments over the next few years. That said, given current forecasts of relatively sluggish growth (but no recession) I would expect some, significant - but not, I would emphasise, huge or disastrous - negative employment impacts

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