The headline figure of 5.2pc has been irresistible for Twitter and has spread through the European press and beyond. Le Monde ran a story on Thursday entitled “Brexit: Six Years of British Economic Decay” that was based on the claim.
In the same genre, the New York Times says Boris Johnson’s Britain is “Finally Sinking Giggling into the Sea”, though what it describes as chronic failure could equally apply to most of Western democracies facing a cost crisis and broken medical systems. France’s elections on Sunday were a primordial scream against just such ‘failures’.
The CER’s top weight in the Doppelgänger basket is the US (31pc), which happens to be at the tail end of a colossal fiscal experiment, funded dollar for dollar by an obliging Federal Reserve. Washington let rip under Trump and doubled the dose under Biden. As the world’s largest producer of both oil and gas, the US economy is shielded from the energy shock. It is hardly a relevant benchmark for a UK linked to the EU’s energy system.
Several others such as New Zealand (14pc), Norway (8pc) or Australia (5pc) are commodity exporters and therefore beneficiaries of sky-high raw materials prices.
The Office for Budget Responsibility thinks Brexit might shave 4pc off GDP over a ten-year period. That is plausible but little more than a guess. Roughly half the putative damage comes from trade barriers, but as Lord Frost told UK in a Changing Europe on Thursday the models used to calculate such gains and losses relying on studies of ex-Communist and autarkic basket cases suddenly enjoying windfall gains from opening up. That is hardly relevant.
The other half is imputed from lower productivity due to less immigration, but the UK is not in fact restricting immigration that much, and the opposite theoretical case can be made in any case. Singapore is limiting inflows of workers under its ‘lean labor policy’ in order to raise productivity.
Let me be clear. There are many aspects of Brexit that cause me heartburn, not least the state of union, the intractable conflict over the Ulster Protocol, and Downing Street’s assault on the non-EU Court of Human Rights (which we should uphold). But the macroeconomic consequence of the Referendum is not one of them, which is not to belittle specific headaches faced by individual exporters.
The UK may well have a horrible year ahead as we grapple with the global inflation shock, but it is hard to see how the eurozone will do any better. It faces the same energy shock — or worse — and is already prey to an incipient sovereign debt crisis as the European Central Bank winds down bond purchases. The old pathologies of a dysfunctional split-tier currency union are resurfacing.
The latest spate of stories on the costs of Brexit mostly contain the same tropes. One is that goods trade has shrivelled by 13.6pc. Yet a slice of this commerce had no value added for the economy. Many containers of clothes, toys, or electronics from East Asia used to go to UK ports for warehousing before reshipment to the Continent. They now go to EU ports directly. The trade loss is a statistical illusion.
Supply chains have been rationalised to avoid the multiple criss-crossing of manufacturing components. The tiny marginal gain that encouraged much of the cross-Channel back and forth — to the detriment of CO2 emissions and clogged roads — has been eliminated by customs frictions. Is Britain a net loser or a net winner when German car companies in the Midlands switch to local subtractors under import substitution?
The worst trope is to quote forecasts by a body such as the OECD that has misread the effects of Brexit and the relative performance of the UK every year with heroic regularity, and to present the claim as a fait accompli.
The OECD now says the UK will be the G7’s zero-growth laggard in 2023. Perhaps it will be, given that Rishi Sunak’s fiscal austerity leads the pack. But remember that the OECD said the same thing during the pandemic, forecasting that the UK would trail in bottom place as the developed world recovered in 2021.
In the end the UK was the G7’s star performer with growth of 7.4pc, viz 2.8pc in Germany and 1.6pc in Japan. The OECD entirely missed Andy Haldane’s ‘coiled spring’ rebound.
As for rejoining the single market, such a move would scarcely nudge the macroeconomic needle. What it would do is to place this country back under an unaccountable and unsackable government in Brussels, perpetuating Britain’s civil war on Brexit. Those Tory ministers toying with such a notion are out of their minds.