The UK only managed one month, twenty-six days, and an hour outside the European Union before the first Covid lockdown kicked in. Since then, we have enjoyed our largest slump in output since the “Great Frost” of 1709, the highest inflation in over 30 years, and an energy crisis. Assessing Brexit’s economic impact thus means fishing in rather muddied waters.
When writing about Brexit, one must be also aware of their own prejudices. For the avoidance of any doubt, I would have voted to Leave in 2016. I say “would have” since I was 16 at the time, in the middle of my GCSEs, and yet to start shaving.
But I’m sad enough to admit that I was a teenage Eurosceptic, and campaigned for Brexit. Raised on a solid diet of Niall Ferguson, I became convinced that the EU was unlearning the lessons of the Renaissance and stifling economic growth through bureaucratic inertia and uniformity. One opportunity of leaving was to reverse this trend towards stagnation.
When approaching the data, I come from the natural position of wanting to show that Brexit injected into politics was worthwhile. Fortunately, between universities, think tanks, and spreadsheet-savvy columnists, many metrics of our performance are available.
Brexit’s most obvious and immediate impact was a 16 per cent reduction in imports and exports to the EU: a reality any Eurosceptic must acknowledge. Erecting trade barriers with our nearest and biggest partner was always going to be problematic, even if the trade-off was new opportunities elsewhere.
A survey of 500 firms by the British Chambers of Commerce found more than half were struggling with new rules, paperwork, and checks faced by companies trading with the EU outside the Customs Union. Whilst most nations saw international trade fall off a cliff during the pandemic, Britain’s share has failed to bounce back at the same rate.
Furthermore, researchers at the London School of Economics have suggested that Brexit contributed to the record food price inflation we have seen in the last two years. UK food prices rose by an average of 25 per cent between December 2020 and March this year. They argue that without Brexit, those prices would be 30 per cent lower, and that the rise began way before the current inflation spike.
Of course, the free-traders since Robert Peel has been that dropping tariffs means cheaper food. But despite Liz Truss’s best efforts at cutting and pasting trade deals, between the 15-year-delay in our Antipodean trade deals and the mixed messages around CPTPP, we seem much more willing to suck up to farmers than seize our opportunity to liberalise trade and cut prices.
We have combined an inevitable act of trade disruption without an attendant embrace of new freedoms. Similarly, we have used the end of free movement to swap a steady flow of well-educated Eastern European tradesman and baristas for surging numbers of students and dependents from the developing world.
Many of those who voted to Leave would have happily disrupted the Treasury’s spreadsheets for lower immigration numbers. But the Government has managed to combine record levels – partially because of Ukrainian and Hong Kong refugees – with a stubbornly sluggish growth rate. Staff shortages have pushed up wages, but also forced some firms to reduce output and sack staff.
But it is with our anaemic growth that the first cracks in the Brexit-to-blame narrative first appear. Between 1970 and 2008 – as Simon Clarke recently highlighted – the UK grew at three per cent a year. Since then we have failed to reach even half of that.
One notes that 2008 is a full eight years before we voted to Leave – and around twelve before we actually did so. Our lethargy pre-dated leaving. And, as Tim Congdon has demonstrated, over the seven years since the end of 2015, output in the Eurozone has only been one per cent ahead of the UK’s, driven largely by high-growth rates in post-Communist states. At least we’re out-perfoming the Germans.
Do remember that the Remain campaign suggested that the Treasury’s worst-case scenario would see GDP being six per cent lower, with tax receipts taking a £36 billion blow. George Osborne threatened swing voters with a “DIY recession”, unemployment spiking by 500,000, and a “punishment budget”. All proved wrong – and much more consequential than any words on the side of a bus.
The inconvenient truth for those Remainers still fighting the Brexit wars is that both the vote to Leave and our eventual leap into doing so have changed remarkably little about the UK economy.
Partially that is because we have failed to seize the opportunities available in removing trade barriers or de-regulating, although recent changes around gene-editing provide causes for optimism. Yet the Westminster mood music is towards either scaling back deregulatory efforts, or imposing more under the umbrella of animal welfare, consumer protection, or Net Zero. The Blob is just as keen on stagnation as Brussels.
Simply put, the last few years have proven how little the EU mattered to the UK economy. Membership provided a useful scapegoat for our dysfunctional political economy, a way of putting off our choice between being a health service with a government attached or an over-sized Bicester Village. Brexit’s greatest legacy is to make us solely responsible for our mess.
A pro-European integration German foundation called The Bertelsmann Stiftung produced a report outlining how countries in the Single Market had benefited economically from it in the two decades since its foundation. They estimated that the average Dane had done best – cumulatively gaining 10,400 euros per head in the time frame.
The average Brit? 250 euros better off – a measly 10 or so a year. For context, that is about a twentieth of what our average membership payments were, per person. This shouldn’t be surprising: the UK’s growth rate has been slower since the Single Market was established, and our trade with it is shrinking – from 55 per cent of our exports in 2006 to 45 percent in 2015.
Looking at such longer-term trends is vital in assessing Brexit. Not only because we had 45-odd years of membership to judge its merits, but because we currently have Covid, inflation, and the consequences of the Ukraine war clouding the picture.
Brexit-related tariff and non-tariff barriers play a role in inflation. But lockdowns, the monetary incontinence of the Bank of England, and Putin’s invasion of Ukraine were far more important. Core inflation remains stubborn across the Continent, and comparing our overall rate to that of, say, Spain obscures how the vagaries of energy supply affect costs. Our already-poor trade deficit also looks all the worse for Putin’s meddling.
That we have failed to bounce back as quickly as other countries owes far more to our sluggish public sector productivity – down 6.8 per cent on 2019 – than anything Brexit-related. That must also be balanced against the boost provided by our successful vaccine programme and attendant early unlocking – something facilitated only by a Brexiteer government.
But there are also a record of two million out-of-work for being long-term sick: a number that has surged since lockdown and which comes at a time when both unemployment is low and vacancies stand at over a million. Changing this will mean returning to the subject of welfare dependency that the Tories have long since neglected more than anything Brexit-related.
The greatest consequence of Brexit has been to force politicians to listen to voters who were long ignored and ask broader questions about what our future economic model should look like. Our exit was a release from constraints. It is only our own fault if we have failed to use this freedom properly.
Vote Leave always argued that Brexit was only the beginning of reforming our economy, not the end. It is down to the vagaries of human personality and institutional inertia that they could not see that through. As ever, the problem Britain has are politicians willing to babble about growth, but uninterested in doing anything actually designed to deliver it.
To misquote the Bard: the fault lies not in Brussels, but in ourselves.