INSIGHTS / News
The Times: A destructive Brexit will create no winners, only a divided, poorer UK
Saturday, 19 August 2017
With its back against the sea and outmatched in numbers, the British army managed to escape from Dunkirk and win the war. One year into Brexit, the belief among mainstream media is that our government will manage a similar achievement: that even without an economic plan, it will lead Britain to carve a good deal out of Europe.Evidence suggests the opposite: Brexit is making our economy poorer and our society more divided.
The economics are simple. The pound is down, inflation is up, spending is down and businesses are leaving. Sterling has depreciated more than 20 per cent against other leading currencies and is approaching parity against the euro. Britain imports half the goods it consumes, including half the food, three quarters of vegetables and even Marmite. A weaker pound means hard-working families who were promised a £350 million weekly Brexit treasure will be able to afford less, not more. If things are getting more expensive, wages continue to stagnate against inflation, matching the same level they were in 2006.
The list of firms potentially moving thousands of employees abroad includes Deutsche Bank, Bank of America, Lloyd’s of London, Diageo, the vodka maker, down to Smiffys, a fancy dress manufacturer. The uncertainty is not only hurting incomes but wealth too. The property market, a piggy bank for many Britons, is dwindling.
Some argue taking back control was worth the price, others that these numbers come from project fear. The reality is we are only at the beginning of realising what the full bill will be. Last year, we estimated that Brexit would shave off about £145 billion, equivalent to 7.5 per cent of GDP over eight years. The CBI says the loss will be between 3 per cent and 5.5 per cent of GDP by 2020.This isn’t only about the economy.
Brexit is slowly turning into a social crisis. It has widened a rift between the young and the old, the rich and the poor, the north and the south. At the core of the problem lies an unbalanced asset-rich and wage-poor growth model, focused on finance and services, and lacking investment in infrastructure and education.The UK ranks low for productivity and education with literacy and numeracy scores at the bottom of OECD countries but wins top ranks when it comes to inequality. One third of our land belongs to the aristocracy yet one in three children lives in poverty. The 7 per cent privately educated as children make up half of top jobs in journalism, the judiciary and politics, a government report said. The top 1 per cent of the population makes 27 per cent of taxable income, says the ONS.
Inequality and injustice spell anger. None were going to disappear by exiting the EU or reducing migration. NHS funding is shrinking and crime is rising, up 7.7 per cent since last year in London, according to Metropolitan Police data. While the country needs more schools, better healthcare and opportunities for people to pursue their aspirations, the government has to turn its focus on the Brexit bill, the Irish border and renegotiating hundreds of trade agreements.
The irony is that rather than taking back control, Brexit has made us more dependent on our European neighbours. Previously painted as an economic corpse from which we needed to unshackle ourselves, the EU is turning the corner. Germany, Spain and even Italy are recovering. After surviving the financial crisis in relatively good shape, Britain is lagging behind. The UK remains an importer of goods and human capital. Europe has for years provided the skills, raw goods and manufacturing base, while Britain exported services. No trade agreements with the US, China or any Commonwealth country will be able to absorb the immediate loss from a trade disruption with Europe, which takes 44 per cent of our exports.
About a year ago, economists wrote in The Times that Brexit would generate poverty and turn Britain into a divided kingdom. Today we have the first evidence that it is doing so. Yet our government has neither explained the full cost nor considered changing its path. Instead, it is entrenching itself into a hard-exit stance, keeping the country out of the single market and pushing it closer to an economic cliff edge.
Today, Brexit looks increasingly less like Dunkirk and more like the charge of the light brigade: a combination of miscommunication and tactical errors turned into disaster. There are no winners. A destructive, no-plan Brexit will hurt everyone. What we need is to strengthen ties with our trade partners, rebalance our economy and give people opportunity.We are not too late.
Sometimes, the best strategy is to turn back.
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