This EU Won't Work

Some economics forecasters have reversed their dire forecasts for post-Brexit Britain.

We love economics. It’s a bit like driving a car at night without lights, peering at the road ahead, hoping that nothing unexpected emerges from a side road, all the time checking the mirrors to see whether anything behind looks familiar. There’s plenty of room too for back-seat drivers and innocent voices asking if we’re nearly there yet. It’s necessary, exciting and dangerous; there are going to be some crashes, obviously. 

Having, with others, attempted to save the Euro by bailing out Greece the IMF now thinks its economy cannot grow fast enough to repay its debts and they will not participate in another rescue unless there is significant relief from creditors. The German people won’t accept that and the Netherlands has already said it won’t help if the IMF doesn’t. Meanwhile the Greeks continue to suffer an unprecedented unemployment level of 23% and double that for young people; they must break free and leave the Eurozone. The IMF has previously admitted it was wrong to forecast recession in Britain if we left the Single Market.

Top-flight business consultancies are now predicting a more positive outcome for Britain. PwC (PricewaterhouseCoopers) now forecasts that the UK will remain the fastest-growing economy in the G7 up to 2050. That’s bold, compared to the gloomy outlook PwC took before the Referendum. The argument is based partly on seeing the positives in Brexit but acknowledges that it’s not all about the EU; the UK has better demographics (more workers per dependant). We can of course expect to be overtaken by India and other developing countries with whom we now hope to have more open trading relationships. Deloitte (chief economist Ian Stewart) believes the UK’s trade gap will shrink to the lowest levels for a generation as a result of Brexit. 

From PwC: “With potential average annual growth of around 1.9%, the UK is projected to be the fastest growing economy in the G7 over the whole period to 2050. The UK’s position is sustained by its relatively larger projected working-age share of the population than in most other advanced economies.”

From Deloitte: “Last week two of the UK’s leading economic forecasters concluded that Brexit is unlikely to cause a sharp slowdown in UK growth over the next three years.” (The National Institute of Economic and Social Research (NIESR) and the Bank of England.)

TheCityUK is the main lobby group for the top financial institutions in London. Its January report shows a remarkable about-turn from pro-EU, Brexit pessimism in its report last March. Apart from escaping anti-City, Brussels regulations it points out that 90% of global growth will occur outside the EU (the world’s slowest-growing, major trade block). The group still wants to achieve the best possible agreement with the EU because of its importance today.

From Oliver Wyman, commissioned by TheCityUK: “There are likely to be opportunities arising from new networks of trade and investment agreements, that the UK will negotiate with its partners, and nurturing of growth areas in the sector … boosting jobs, taxes and the trade surplus delivered by the sector.”

The positive spin now being offered by many economists and institutions doesn’t prove we’re on the right road at last but, though still in the dark at least the rain has eased up, so we feel a bit safer.