Why the UK’s GDP for 2020 and 2021 being revised slightly upwards does not mean Brexit was a good idea
They are rare, so I understand it when Brexiters jump all over any news story which even hints at making Brexit look remotely okay. Last week, it was reported that the ONS had revised the UK’s historical GDP figures so that the drop in GDP via lockdowns in 2020 wasn’t as bad as previously thought, and the rebuilding of GDP afterwards, in 2021, was better than it was previously purported to have been. All this meant that the British economy was 1.7% larger at the close of 2021 than it had been imagined up until last week.
This is a big deal to many, particularly in Tory circles, as it means that instead of the UK economy being an outlier, the worst to recover from the pandemic in the G7, it’s more “meh” - nowhere near as good as the US, but sort of on par with France.
The Tories, desperate for good news, have jumped all over this one with vigour. I can understand why - it does point to their handling of the pandemic, at least from a purely economic perspective, as being slightly better than it had been reported up until the ONS revision. The Brexiters, even more desperate for good news, claimed victory as well. Unfortunately for them, this latter bunch had no real intellectual claim to make here. Despite that, you’re going to be hearing from them a lot about how the GDP revision means Brexit is good, in the same way the vaccine rollout and the war in Ukraine are brought up in a similar, fact-free manner. So allow me to get ahead of the game and debunk their arguments.
For a start, the period we are talking about partly took place while we were still in the single market and customs union. In 2020, although we had technically left the EU, we were in the “transition period”, which meant we remained for the moment inside the vast majority of EU institutions. Therefore, 2020 being slightly better than previously thought has nothing to do with Brexit given we were, at the very least from an economic perspective, essentially still in the EU.
2021 being better than expected has a lot more to do with Brexit, to be fair here, as it was at the very start of that year that we really left the EU institutions, but again, this doesn’t tell you Brexit was a good idea. One of the weakest Remain campaign arguments in 2016 was that if we voted to leave the EU, the economy would instantly collapse. While there were some instant fall out issues - the pound lost a lot of value, still not recovered - the truth was, leaving the EU was always going to be a medium-term to long-term disaster as opposed to a short, sharp shock to the system. Brexit’s real problems start small and compound themselves over time. That’s why it’s such a terrible idea.
Take the trade in goods. For the moment, leaving the flow of materials from the EU into the UK relatively unchecked is understandable and probably more low risk than putting them in place. We didn’t check goods coming into the country from the continent while we were in the EU, so why do it now? Well, beyond the fact that the UK will probably run into issues involving the WTO and the EU trade deal at some stage, the current system is unsustainable for several reasons.
One is that if it becomes clear that the UK government is simply never going to institute proper checks on goods coming from the EU into the UK, the incentive for a lot of businesses to leave the UK becomes massively stronger. If you make stuff and sell it all over Northern Europe, and it’s really tough to get stuff out of the UK and into the EU but relatively easy to get stuff from the EU into the UK, then why the hell would you make stuff in the UK? Just park yourselves in northern France instead. That way, you have access to the single market because you’re inside of it, while selling your goods into the UK is not that much of a hassle given the lack of checks.
Again, this is a classic example of what I mean about the negative effects of Brexit being cumulative instead of acute. A handful of businesses located in the UK relocate to northern France for the reasons I’ve stated above. Just a few at first. It turns out to be a great idea and they flourish. As a result, more businesses flow out of the UK into France, having seen the proof of their success. And then some more. And then some more. This trend sets off alarm bells across sectors outside of manufacturing and retail. Why are so many companies leaving the UK? Perhaps we should consider it as well?
This is why the Jacob Rees-Mogg comment about Brexit coming good in 50 years’ time is so wrongheaded: he’s precisely wrong, as in, the opposite of what he is saying will happen will end up being the case. Brexit will only really show itself to be a mistake over time; the evidence of its failure becoming bigger, easier to understand. The negative trends it created visible across a decade or more. 2021 was never going to tell us very much about it, particularly given we had the pandemic effect greatly confusing matters.
It was also never going to be the case that in order for Brexit to be deemed a bad idea, Britain’s growth rate had to be the worst in the G7. All that had to happen was for the promises of the Brexiters pre-June 2016 not to come to fruition. And none of them have: we didn’t get to stay in the single market while rejecting freedom of movement, we didn’t form a new trading nexus involving the United States - we didn’t even get a deal at all from America, in fact. The EU didn’t fall apart, it got stronger in the face of Brexit. Leaving the European Union didn’t make the British economy bigger and actually, we look more and more like the western EU economies we used to look down upon and wanted to leave the EU to become “unshackled” from (all while the eastern EU countries have economies growing at rates we can only dream about). Brexit didn’t solve the problems its supporters told us it would - it merely created new problems to deal with and fewer tools with which to solve those problems.
A lot of people not particularly emotionally invested in one side of the Brexit argument or the other say that we won’t know whether Brexit was a good idea or not until about ten years after we departed. I don’t think this a bad way of thinking about it - particularly as that will give Brexit enough time to demonstrate why it was such an historic mistake.
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"One of the weakest Remain campaign arguments in 2016 was that if we voted to leave the EU, the economy would instantly collapse."
That was never from the Remain Campaign, but a crude, failed attempt at campaigning by George Osborne, the Chancellor who said public spending crowded out private Investment, when it actually attracts it. Clegg later said that Osborne's intervention would have been instantly disbelieved and weakened the Remain case greatly. This has become the go to example by the Brexits, of the Remain Campaign getting predictions wrong, despite that it never came from them.
"For the moment, leaving the flow of materials from the EU into the UK relatively unchecked is understandable and probably more low risk than putting them in place."
In having no systematic check on imports from the EU, the UK has generated the obvious and logical response from the EU's dodgy traders and criminals. The trade in counterfeit goods has increased enormously as seen by one huge operation in fake branded goods uncovered by detective work and not from border checks. Contaminated and unsafe products will also be coming here in greater quantities, with the UK outside of Single Market standards. Illegal products and counterfeit goods are now coming with no efforts made to conceal them as if they were legal, as not even cursory checks are now expected by criminals.
Since the trade disadvantages the UK against EU businesses in having their goods sailing rapidly through to the UK unchecked, but only one way,, this one sided flow gives the UK little to offer to drop to other countries in return for a trade deal.
The UK Brexit Government has chosen the worst of all worlds in choosing to disadvantage UK business, making International trade deals favour the opposite, while increasing safety risks and fake goods. Yet this policy is maintained because of the UK's shameful lack of border staff, IT and infrastructure and it probably breaks the WTO legal requirements on not favouring one group of countries; ironically the EU; over others.
The Leave Campaign had it's witless dupes holding up signs around Westminster, "WTO - Way to go" and did they really mean to advantage EU country's trade? The whole thing is insane.
This illustrates that Brexit is no longer about the economy or the national interest or even sovereignty - but all about news management and propaganda.
Curious this morning that there is almost a total Conservative news black-out of the re-joining of the crucial Horizon scheme.