Preparations are being made on both sides of the Channel against the worst that could, but probably wouldn’t, happen.
The UK economy since 2016 has been relatively stable. Growth too hasn’t been bad compared with similar countries—unemployment is very low, the deficit is now in comfortable territory. Business investment has been too low, perhaps because of Brexit uncertainty, but foreign direct investment (FDI) has remained well ahead of our competitors in the EU (who Boris diplomatically calls “our friends”); FDI in the UK is more than double that for France and Germany combined.
A no-deal Brexit would be a shock after almost almost half a century of entanglement with the EU. Government planning will need to include looking after those worst affected, which it has promised to do. The EU threatens to make our position as bad as possible for political reasons; it too would suffer an economic shock in conditions that are far from benign and many people and businesses in the remaining 27 member states would suffer too. Should we therefore stay in the Union to avoid the discontinuity problems?
The decision must be based on more than just economics if it affects our freedom and laws, which it does in ever-increasing ways. For the economic case the criteria must weigh the long-term above the short-term. The UK is strong and resilient enough to bridge a ‘crashing out’ scenario, unlike Greece where the leverage of the EU was too great to withstand even for a radical, ‘populist’ government—it threatened to crash Greek banks and money from cash machines virtually dried up—which caused Greece to cave in to onerous terms that shrank its economy by 25%. The EU does not wield equivalent power over Britain.
What is the basis for assuming our future prosperity depends on the EU when the past does not clearly demonstrate that membership boosted it? (see Did The EU Bring Us Growth?). Our trade with the EU may have increased but at the cost of that with some of our closest real ‘friends’ and partners, the USA and the Commonwealth, the latter a community of 2.4 billion people (almost a third of the world’s population). Many of these countries have stronger economies than the EU’s (Singapore and CANZAC—Canada, Australia, New Zealand) or are growing faster (India, Malaysia and now even in Africa). Despite the EU-imposed trade barriers with these countries the UK’s trade now exceeds that with the EU and does not suffer the huge negative imbalance it has with the EU. This is for two main reasons: first, because the EU relationship favours others more than the UK and second, because the EU’s share of world trade is rapidly diminishing, already only 15%, half what it was in 1980. By contrast our largest trading-partner country is the US, but perhaps we should add Canada and Mexico (NAFTA/USMCA) for a fairer comparison between trade blocks.
Britain’s principal trading strength is in services, especially education, law and finance, plus high-tech areas such as pharmaceuticals and IT. Leave or stay, the EU intends to weaken the position of the City, which has anyway made the adjustments necessary in either case. Heavy-handed regulations such as GPRD and MIFID II further weaken the UK’s global advantages in IT and financial services and the ever-increasing intrusion of EU law threatens to undermine our hugely popular legal services (see The World’s Favourite Law).
The EU, focusing on a misguided version of unity, has endangered the economic and political strength and stability of its member states by amassing ever-greater control. The Eurozone is in dire straights, with interest rates now at -5% and money printing about to restart in a desperate ‘whatever it takes’ attempt to survive a while longer. These are about the only tools available, short of solutions that will not be accepted by the more fortunate countries in this ‘benevolent brotherhood’ of nations.
The EU represents the past, a misguided approach to addressing issues that are no longer the focus of the world’s problems or prospects.
Why should we trust the Civil Service’s Yellowhammer report on its ‘worst case scenario‘ of the effect of a ‘no deal’ exit from the EU, mostly reported by the anti-Brexit media as a prediction? What is the ‘best case’ scenario and what is the ‘most likely case’ given that preparations have been made by both the UK and EU for the event that there is no deal? Yellowhammer is anyway based on much the same, failed model as used by the Treasury in 2016 and the Bank of England’s current worst case scenario (not prediction) given to the Treasury Select Committee more recently which had a -5.5% hit to GDP (up from -8% last year). To remind you, the May 2016 Treasury forecast for GDP growth in Q3 2016 was -1%, and -0.4% in Q4, whereas the actual growth was +0.6% in both quarters, bang on trend at 2.4% per annum despite the subsequent unexpected Referendum result. The Treasury’s assumptions include the UK imposing reciprocal tariffs against our ‘friends’, which the Government says it will not do.
The EU has made many provisions to smooth the transition, to keep planes flying and trucks moving for example. Yes, they can be withdrawn whenever it suits our ‘friends’ but by then the UK too will have furthered its arrangements. It would be illegal for the EU to discriminate against UK exports of course and the Director General of the WTO, Roberto Azevêdo, says no-deal would be “perfectly manageable”. Perhaps there will be some immediate food shortages of certain products so we might have to (literally) tighten our belts for a while but ultimately food prices will fall without the high tariffs on our non-EU food imports and our own farmers will respond to opportunities (see Bacon, Lettuce and Tomatoes) EU suppliers too will react to maintain market share; they won’t take kindly to suffering for the political purposes of Macron and others (M. le Président especially should beware of his own farmers’ wrath).
Meanwhile Xavier Bertrand, president of the Calais region, says the port is ready for a no-deal Brexit and has made the necessary investments to prevent lorry queues. But Dover-Calais represents only 5% of the UK’s trade tonnage. Dover is our ninth-largest port while others have spare capacity and link to other EU destinations that would be happy to take over from Calais. And what tonnage do our financial, educational, legal and pharmaceutical exports represent?
Project Fear won’t be allowed to die, or even fade away.