The pro-Brussels establishment paints Brexit as an economic catastrophe to reverse it


The overall figure of 5.2pc was irresistible to Twitter and spilled over into the press across Europe and beyond. Le Monde published an article on Thursday titled “Brexit: six years of British economic decline” based on this claim.

Along the same lines, the New York Times claims that Boris Johnson’s Britain is “finally sinking laughingly into the sea”, although what it describes as a chronic failure could also apply to most Western democracies facing a cost crisis and broken medical systems. Sunday’s French legislative elections were a primary cry against such “failures”.

The highest weight of the REC in the Doppelgänger basket is the United States (31 pc), which happens to be at the end of a colossal fiscal experiment, financed dollar for dollar by a complacent Federal Reserve. Washington dropped under Trump and doubled the dose under Biden. As the world’s largest producer of oil and gas, the US economy is insulated from the energy shock. This is hardly a relevant benchmark for a UK tied to the EU energy system.

Several others like New Zealand (14pc), Norway (8pc) or Australia (5pc) are exporters of raw materials and therefore benefit from the exorbitant prices of raw materials.

The Office for Budget Responsibility thinks that Brexit could reduce GDP by 4% over a ten-year period. This is plausible but little more than a guess. About half of the putative damage comes from trade barriers, but as Lord Frost said on Thursday in the UK in a changing Europe, the models used to calculate these gains and losses are based on studies of former communist and autarkic cases suddenly enjoying windfall gains from the open. It’s hardly relevant.

The other half is attributed to lower productivity due to less immigration, but the UK does not actually restrict immigration as much, and the opposite theoretical case can be made in any case. Singapore restricts worker inflows as part of its “light labor policy” to increase productivity.

Let me be clear. Many aspects of Brexit give me heartburn, including the state of the union, the intractable dispute over the Ulster Protocol and Downing Street’s assault on the non-EU Court of Human Rights ( that we should defend). But the macroeconomic consequence of the referendum is not one of them, which is not to minimize the specific headaches facing individual exporters.

The UK could well have a horrible year ahead as we grapple with the shock of global inflation, but it’s hard to see how the Eurozone will do any better. It faces the same energy shock – or worse – and is already in the grip of an incipient sovereign debt crisis as the European Central Bank ends its bond purchases. The old pathologies of a dysfunctional tiered monetary union are resurfacing.

The latest set of Brexit cost stories contain mostly the same tropes. The first is that merchandise trade contracted by 13.6%. Yet some of this trade had no added value for the economy. Many containers of clothing, toys or electronics from East Asia traveled to UK ports for storage before being shipped back to the Continent. They now travel directly to EU ports. The trading loss is a statistical illusion.

Supply chains have been streamlined to avoid the multiple criss-crossing of manufacturing components. The tiny marginal gain that favored a large proportion of cross-Channel round trips – to the detriment of CO2 emissions and congested roads – has been eliminated by customs friction. Is Britain a net loser or a net winner when German carmakers in the Midlands switch to local suppliers under import substitution?

Worse is to quote the forecasts of a body such as the OECD which has misinterpreted the effects of Brexit and the relative performance of the UK every year with heroic regularity, and present the assertion as a done deal.

The OECD now says the UK will be the G7 laggard on zero growth in 2023. Perhaps it will be, given that Rishi Sunak’s fiscal austerity is leading the pack. But remember the OECD said the same during the pandemic, predicting the UK would be in last place as the developed world recovers in 2021.

In the end, the United Kingdom was the star of the G7 with growth of 7.4%, namely 2.8% in Germany and 1.6% in Japan. The OECD completely missed Andy Haldane’s “coil spring” bounce.

As for joining the single market, such a move would hardly advance the macroeconomic needle. What he would do is put this country back under an irresponsible, unsacked government in Brussels, perpetuating Britain’s civil war over Brexit. Those Conservative ministers who play with such a notion are crazy.


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