Reeves mission: to build a European Silicon Valley centred on 'golden triangle'

Brexit is costing the UK 80bn a year in lost taxes, hitting output by up to 8% and investment by more than twice as much. The chancellor has her work cut out

- By Will Hutton

Keir Starmer did not contain his rage when he learned the Office for Budget Responsibility (OBR) would downgrade its forecasts of Britain’s productivity growth in its budget economic assessment.

It was bias in plain sight, he told colleagues and friends alike. One rule for the Tories, who had been allowed kindly forecasts that offered the fiscal room for unjustified tax and national insurance cuts; another for Labour, which would have to find at least £9bn on top of the many more billions needed to plug the fiscal hole. He was both right and wrong. Right to be incandescent at the implications and the legacy his government had been bequeathed; wrong that the OBR had somehow indulged the Tory party.

The collapse since the financial crisis in UK productivity growth – growing at a third of its former rate for more than 15 years and at the heart of most of our economic and social ills – has confounded more economists than the handful at the OBR. Surely a return to trend was not impossible, the OBR had thought and predicted. But it has finally called optimism a day.

This year’s three Nobel prize winners in economics won because they all argue the alchemy of capitalist growth lies rather in “creative destruction” – letting outworn companies with redundant technologies go to the wall while fostering their rapid replacement by young and innovative companies based on the technologies of today or tomorrow.

Troublingly, most of Britain’s top companies 30 years ago are the same as today, and while we generate a multiplicity of young innovative challenger companies, 19 out of every 20 end up being acquired by either home or foreign buyers. Britain is weak at creative destruction; a meaningful budget must plot a way out.

The economic disaster that is Brexit