Brexit will be remembered as a “historic economic error” which damaged the UK economy and has helped to drive inflation higher, according to the former US treasury secretary Larry Summers.
Singling out Britain’s departure from the EU as a factor for higher costs, Summers also criticised the UK’s economic policy as “substantially flawed for some years”.
Brexit “reduced the competitiveness of the UK economy, put downwards pressure on the pound and upwards pressure on prices, limited imports of goods and limited in some ways the supply of labour,” Summers told BBC Radio 4’s Today programme.
“All of which contributed to higher inflation,” he added.
Official figures last week showed inflation remained stubbornly high, at 8.7%, in the UK as households come under pressure from the fastest annual rise in food prices since the late 1970s. US consumer prices have been slowing in recent months, dropping to an annual inflation rate of 4.9% in April.
In a stark critique of Britain’s management of the economy, Summers did not spare the Bank of England. He blamed the central bank for higher levels of inflation, saying these were “reinforced by very ill-judged monetary policies that were substantially too expansionary for too long”.
Asked if the Bank would be right to keep raising interest rates in order to tackle persistently high inflation, Summers said he believed this was the right path, even if it may not seem palatable.
“There is a lesson from experiences we have all had,” he said, comparing it to treatment for illness. “Usually when you are prescribed a course of medication, even if the drugs are not so pleasant themselves, and even if they possibly have some side effects, it’s usually better is to take the whole course of medicine, the first time it’s prescribed, than to stop taking the medicine early and wish a recurrence of the underlying infection.”
Summers said he did not want to forecast the trajectory of the UK economy, and would leave this to British experts, but said he would “be surprised if two more years passed without the UK entering into recession”.
Lower growth, coupled with higher inflation is a “real concern in much of the industrialised world,” Summers added.
“Certainly it’s a concern in the United States, but I think it’s a particularly dramatic concern in the UK that you have very substantial entrenched inflation, it’s going to be very difficult to eliminate that entrenched inflation without a significant slowdown in the economy,” he said.
Summers comments came after a recent report showed that British households have paid £7bn since Brexit to cover the extra cost of trade barriers on food imports from the EU.
Researchers at the London School of Economics (LSE) estimated the impact of leaving the bloc on UK food prices and found that trade barriers consistently hampered imports, pushing up bills by an average of £250.
The UK has the highest food inflation rate in the industrialised world, according to recent inflation data. The LSE researchers calculated the cost of food in the UK had rocketed by 25% since 2019, but this would have been only 17% without post-Brexit trade restrictions, nearly a third lower.