All posts in category EU Referendum

How misleading economic assumptions can show Brexit making people worse off

Last week the BBC News headlined Brexit deal means ‘£70bn hit to UK by 2029′. ITV news had a similar report. The source, NIESR, summarizes their findings as follows:-

Fig 1 : NIESR headline findings 

£70bn appears to be a lot of money, but this is a 10 year forecast on an economy that currently has a GDP of £2,000bn. The difference is about one third of one percent a year. The “no deal” scenario is just £40bn worse than the current deal on offer, hardly an apocalyptic scenario that should not be countenanced. Put another way, if underlying economic growth is 2%, from the NIESR in ten years the economy will be between 16% and 22% larger.   In economic forecasting, the longer the time frame, the more significant the underlying assumptions. The reports are based on an NIESR open-access paper  Prospects for the UK Economy – Arno Hantzsche, Garry Young, first published 29 Oct 2019. The key basis is contained in Figures 1 & 2, reproduced below.

Fig 2 : Figures 1 & 2 from the NIESR paper “Prospects for the UK Economy“

The two key figures purport to show that Brexit has made a difference. Business investment growth has apparently ground to a halt since mid-2016 and economic growth slowed. What it does not show is a decline in business investment, nor a halting of economic growth.

After these figures the report states:-

The reason that investment has been affected so much by the Brexit vote is that businesses fear that trade with the EU will be sufficiently costly in the future – especially with a no-deal Brexit – that new investment will not pay off. Greater clarity about the future relationship, especially removing the no-deal threat, might encourage some of that postponed investment to take place. But that would depend on the type of deal that is ultimately negotiated. A deal that preserved the current close trading relationship between the UK and EU could result in an upsurge in investment. In contrast, a deal that would make it certain that there would be more trade barriers between the UK and EU in the future would similarly remove the risk of no deal but at the same time eliminate the possibility of closer economic ties, offsetting any boost to economic activity.

This statement asserts, without evidence, that the cause of the change in investment trend is singular. That is due to business fears over Brexit. There is no corroborating evidence to back this assumption, such as surveys of business confidence, or decline in the stock markets. Nor is there a comparison with countries other than the UK, to show that any apparent shifts are due to other causes, such as the normal business cycle. Yet it is this singular assumed cause of the apparent divergence from trend that is used as the basis of forecasting for different policy scenarios a decade into the future.

The rest of this article will concentrate of the alternative evidence, to show that any alleged change in economic trends are either taken out of context or did not occur as a result of Brexit. For this I use World Bank data over a twenty year period, comparing to the Euro area. If voting to leave the EU has had a significant impact in economic trends 

Net Foreign Direct Investment

There is no data for the narrow business investment at the World Bank. The alternative is net foreign direct investment.


Fig 3 : Data for net foreign direct investment from 1999 to 2018 for the Euro area and the UK.

UK net foreign direct investment was strongly negative in 2014 to 2016, becoming around zero in 2017 and 2018. The Euro area shows an opposite trend. Politically, in 2014 UKIP won the UK elections to the European Parliament, followed in 2015 by a promise of a referendum on the EU. Maybe the expectation of Britain voting to leave the EU could have had impact? More likely this net outflow is connected to the decline in the value of the pound. From xe.com

Fig 4 : 10 year GBP to USD exchange rates. Source xe.com

The three years of net negative FDI were years of steep declines in the value of the pound. In the years before and after, when exchange rates were more stable, net FDI was near zero.

GDP growth rates %

The NIESR choose to show the value of quarterly output to show a purported decline in the rate of economic growth post EU Referendum. More visible are the GDP growth rates.

Fig 5 : Annual GDP growth rates for the Euro area and the UK from 1999 to 2018. 

The Euro area and the UK suffered a economic crash of similar magnitude in 2008 and 2009. From 2010 to 2018 the UK has enjoyed unbroken economic growth, peaking in 2014. Growth rates were declining well before the EU referendum. The Euro area was again in recession in 2012 and 2013, which more than offsets the stronger growth than the UK from 2016 to 2018. In the years 2010 to 2018 Euro area GDP growth averaged 1.4%, compared with 1.5% for the years 1999 to 2009. In the UK it was 1.9% in both periods. The NIESR is essentially claiming that leaving the EU without a deal will reduce UK growth to levels comparable with most of the EU. 

Unemployment – total and youth

Another matrix is unemployment rates. If voting to leave has impacted business investment and economic growth, one would expect a lagged impact on unemployment.

Fig 6 : Unemployment rates (total and youth) for the Euro area and the UK from 1999 to 2019. The current year is to September.

Unemployment in the Euro area has always been consistently higher than in the UK. The second recession in 2012 and 2013 in the Euro area resulted in unemployment peaking at least two years later than the UK. But in both places there has been over five years of falling unemployment. Brexit seems to have zero impact on the trend in the UK, where unemployment is now the lowest since the early 1970s. 

The average rates of total unemployment for the period 1999-2018 are 8.2% in the Euro area and 6.0% in the UK. For youth unemployment they are 20.9% and 14.6% respectively. 

The reason for higher rates of unemployment in EU countries for decades is largely down to greater regulatory rigidities than the UK. 

Concluding comments

NIESR’s assumptions that the slowdowns in business investment and economic growth are soley due to the uncertainties created by Brexit are not supported by the wider evidence. Without support for that claim, the ten year forecasts of slower economic growth due to Brexit fail entirely. Instead Britain should be moving away from EU stagnation with high youth unemployment, charting a better course that our European neighbours will want to follow. 

Kevin Marshall

by manicbeancounter on 04/11/2019  •  Permalink
Posted in EU Referendum, General Election 2019, NIESR
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Posted by manicbeancounter on 04/11/2019

https://manicbeancounter.com/2019/11/04/misleading-economic-assumptions-by-the-niesr-on-brexit/

Leave EU Facebook Overspending and the Brexit Result

Last week an Independent article claimed

Brexit: Leave ‘very likely’ won EU referendum due to illegal overspending, says Oxford professor’s evidence to High Court

The article began

It is “very likely” that the UK voted for Brexit because of illegal overspending by the Vote Leave campaign, according to an Oxford professor’s evidence to the High Court.

Professor Philip Howard, director of the Oxford Internet Institute, at the university, said: “My professional opinion is that it is very likely that the excessive spending by Vote Leave altered the result of the referendum.
“A swing of just 634,751 people would have been enough to secure victory for Remain.
“Given the scale of the online advertising achieved with the excess spending, combined with conservative estimates on voter modelling, I estimate that Vote Leave converted the voting intentions of over 800,000 voters in the final days of the campaign as a result of the overspend.”

Is the estimate conservative? Anthony Masters, a Statistical Ambassador for the Royal Statistical Society, questions the statistics in the Spectator. The 800,000 was based upon 80 million Facebook users, 10% of whom clicked in on the advert. Of those clicking, 10% changed their minds.

Masters gave some amplification on in a follow-up blog post Did Vote Leave’s overspending cause their victory?
The reasons for doubting the “conservative” figures are multiple, including
– There were not 80 million voters on Facebook. Of the 46 million voters, at most only 25.6 million had Facebook accounts.
– Click through rate for ads is far less than 10%. In UK in 2016 it was estimated at 0.5%.
– Advertising is not the source of campaigning. It is not even viewed as the primary source, merely bolstering other parts of a campaign through awareness and presence.
– 10% of those reading the advert changing their minds is unlikely. Evidence is far less.
Anthony Masters concludes the Spectator piece by using Professor Howard’s own published criteria.

Prof Howard’s 2005 book, New Media Campaigns and the Managed Citizen, also argues that we should apply a different calculation to that submitted to the High Court. His book says to apply a one per cent click-through rate, where 10 per cent “believe” what they read; and of that 10 per cent act. This ‘belief’ stage appears to have been omitted in the High Court submission’s final calculation. Using these rates, this calculation turns 25.6 million people into 2,560 changed votes – hardly enough to have swung the referendum for Leave, given that their margin of victory was over a million votes. If we share a belief in accuracy, this erroneous claim should have limited reach.

There is further evidence that runs contrary to Prof Howard’s claims.

1. The Polls
To evaluate the statistical evidence for a conjecture – particularly for a contentious and opinionated issue like Brexit – I believe one needs to look at the wider context. If a Facebook campaign swung the Referendum campaign in the final few days from Remain to Leave, then there should be evidence of a swing in the polls. In the blog article Masters raised three graphs based on the polls that contradict this swing. It would appear that through the four weeks of the official campaign the Remain / Leave split was fairly consistent on a poll of polls basis. From analysis by pollster YouGov, the Leave share peaked on 13th June – ten days before the referendum. The third graphic, from a statistical analysis from the LSE, provides the clearest evidence.

The peak was just three days before the murder of MP Jo Cox by Tommy Mair. Jo Cox was a Remain campaigner, whilst it was reported that the attacker shouted slogans like “Britain First”. The shift in the polls could have been influenced by the glowing tributes to the murdered MP, alongside the speculation of the vile motives a clear Vote Leave supporter. That Jo Cox’s murder should have had no influence, especially when campaigning was suspended as a result of the murder, does not seem credible.

On Twitter, Anthony Masters also pointed to a question in Lord Ashcroft’s poll carried out on the day of the referendum – How the United Kingdom voted on Thursday… and why to a graphic that looked at when people had decided which way to vote. At most 16% of leave voters made up their minds in the last few days, slightly less than the 18% who voted remain.

The same poll looked at the demographics.


This clearly shows the split by age group. The younger a voter the more likely they were to vote Remain. It is not a minor relationship. 73% of 18-24s voted for Remain, whilst 40% of the 65% voted. Similarly, the younger a person the greater the time spent on social media such as Facebook.

2. Voting by area
Another, aspect is to look at the geographical analysis. Using Chris Hanretty’s estimates of the EU referendum results by constituency, I concluded that the most pro-Remain areas were the centre of major cities and in the University Cities of Oxford, Cambridge and Bristol. This is where the most vocal people reside.

The most pro-Leave areas were in the minor towns such are Stoke and Boston. Greater Manchester provided a good snapshot of the National picture. Of the 22 constituencies is estimated that just 3 has a majority remain vote. The central to the City of Manchester. The constituencies on the periphery voted to Leave, the strongest being on the east of Manchester and a few miles from the city centre. Manchester Central contains many of the modern flats and converted warehouses of Manchester. Manchester Withington has a preponderance of media types working at Media City for the BBC and ITV, along with education sector professionals.

These are the people who are not just geographically marginalised, but often feel politically marginalised as well.

Concluding comments

Overall, Professor Howard’s claims of late Facebook posts swinging the Referendum result are not credible at all. They are about as crackpot (and contradict) as the claims of Russian influence on the Brexit result.
To really understand the issues one needs to look at the data from different perspectives and the wider context. But the more dogmatic Remainers appear to be using their power and influence – backed by scanty assertions -to thrust their dogmas onto everyone else. This is undermining academic credibility, and the democratic process. By using the courts to pursue their dogmas, it also threatens to pull the legal system into the fray, potentially undermining the respect for the rule of law for those on the periphery.

Kevin Marshall

by manicbeancounter on 10/12/2018  •  Permalink
Posted in Brexit, EU Referendum, EU Referendum
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Posted by manicbeancounter on 10/12/2018

https://manicbeancounter.com/2018/12/10/leave-eu-facebook-overspending-and-the-brexit-result/