Daily Stock Market Reports

Brexit has made Britain the sick man of Europe again | William Keegan


When recently asked on the Today programme to cite chapter and verse on the subject of Brexit “opportunities” Michael Gove, the secretary of state for all seasons, was hopelessly out of his depth.

However, Gove missed a trick. What he should have said, but as a signed-up Brexiter obviously could not, was that the only “opportunity” arising from Brexit was to conduct a scientific experiment to demonstrate that the whole idea was a mistake. Moreover, it was a confidence trick on the British public, the majority of whom now realise that they have been had.

As business and industry struggle with the consequences of imposing sanctions on our ability to trade with our largest market, and citizens – known to economists as “consumers” – struggle with the higher import prices imposed by the devaluation resulting from Brexit, the polls are pronouncing people’s verdict on Brexit with a vengeance.

A recent YouGov poll tells us that 56% of people think we were wrong to leave the EU and only 32% that we were right. Even 19% of those who own up to having voted leave now think they were wrong. The only age group containing a majority still in favour of Brexit is the over-65s – I have to say they are not among the over-65s I myself bump into, but there it is. And 88% of those who voted Labour in 2019 think leave was the wrong decision. (Keir Starmer and shadow chancellor Rachel Reeves please note!)

It is obvious that the more intelligent members of the Sunak/Hunt cabinet have got the message from the CBI and elsewhere that we need, for the sake of our economy and the general welfare, to rejoin the single market. But this is the love that dare not speak its name, even though it appears that attitudes towards immigration – free movement! – have changed since 2016, when the egregious Boris Johnson, himself of Turkish ancestry, fomented anti-immigrant feeling with nonsense about an imminent flood of Turkish immigrants.

Sunak has picked up the message that the combination of Brexit and the chaos in the Conservative and Brexit party has led foreign observers to conclude that Britain is sinking fast. According to the Organisation for Economic Co-operation and Development, of the group of 20 leading economies, only Russia is performing worse than the UK. Yes, we were known as the “sick man of Europe” until we joined the European Union and – guess what – we have left the EU and have regained that dubious status.

Membership of the EU did great things for this country. Both Labour and Conservative governments fought their corner and, on the whole, got what they wanted. Margaret Thatcher and her righthand negotiator Lord Cockfield played a blinder in the setting up of the single market, and John Major achieved wonders at Maastricht with the UK’s opt-out from the single currency. As for rightwing concerns about “ever closer” union, they were duly assuaged. In essence, what those all too influential leavers achieved was a wholly unnecessary Brexit that shot the economy in the foot.

The Office for Budget Responsibility calculates the cumulative damage of Brexit will be enough to knock 4% every year off our potential GDP. As Michael Saunders, a former member of the Bank of England’s monetary policy committee, has said: “The need for tax rises [and] spending cuts wouldn’t be there if Brexit hadn’t reduced the economy’s potential output so much.” And the Financial Times recently reported that many of the asset managers whom Sunak and Hunt were trying to pacify after the Truss-Kwarteng fiasco were concerned about the dangers of overdoing austerity!

It was a former Treasury permanent secretary, Lord Croham, who observed to the historian Lord Hennessy and me once: “What matters is not balancing the budget but balancing the economy.” Yet, with the recent budget and the chancellor’s “shock and horror” talk, we seem to be back to the era of sado-monetarism. We are certainly a long way from balancing the economy.

The economist Jim Ball used to say he was suspicious of the OBE – not the Order of the British Empire, but the people who give you One Big Explanation.

For this government, the OBE for our economic troubles was first Covid, then Ukraine. I am not saying Brexit is the cause of all our problems but – my goodness! – it has magnified them. With due respect to the memory of the late Prof Ball, I should like to nominate Brexit as the One Big Explanation for why this economy is faring so much worse than the rest of the G20.



Read More: Brexit has made Britain the sick man of Europe again | William Keegan

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