For some, the explanation for these atrocities is simple: Britain is paying the price for its decision to leave the European Union. Forget the impact of the worst pandemic in a century. Forget what Vladimir Putin’s invasion of Ukraine has done to energy prices. Brexit is the ‘gorilla in the room’. Really? Or is this a classic case of confirmation bias, where someone starts with a preconceived view and then finds evidence to support their argument? As in: I always said Brexit would be a disaster. the economy is in bad shape. Brexit is to blame and here is the proof. There is no doubt that the UK has some serious economic problems – including a chronic trade deficit and a poor record for investment – but they predate the Brexit vote in 2016. Britain has not had a goods trade surplus since the early 1980s and Inflation-adjusted wages have barely risen since the global financial crisis of the late 2000s. If the economy had been firing on all cylinders in 2016, it seems unlikely that more than 17 million people would have voted to leave the EU. Britain is not the only country facing labor shortages. The German government said earlier this year it was cutting red tape to make it easier to hire workers from Turkey, and its major industrial union, IG Metall, has put forward a claim for an 8% increase. France reported 300,000 vacancies in its hospitality, with a similar picture in Spain. According to the Office for National Statistics, at the time of the 2016 referendum, 2,335,000 people born in other EU countries were employed in the UK. At last count, that total was 2,389,000. The number is down slightly to a peak of 2,508,000 in early 2020, but there has been no mass exodus of EU workers. Nor is the UK alone facing cost-of-living pressures. The annual inflation rate for the 19-nation eurozone currently stands at 10.7%, higher than the UK’s 10.1%. US inflation peaked at just over 9% over the summer. The European Central Bank is raising interest rates on concerns that tight labor markets will lead to a wage-price spiral. so does the Federal Reserve in the US. The upward pressures on inflation are caused by the pandemic, the supply chain bottlenecks that followed the pandemic, and the failure of central banks to act quickly enough when problems started to emerge. All of Europe is facing recession this winter, with Germany paying a heavy price for its reliance on Russian gas. All sorts of dire predictions were made about the UK economy at the time of the Brexit vote: house prices would plummet, unemployment would rise by 500,000 and the economy would plunge into immediate recession. None of this happened. The economy has declined. Mark Carney, the former governor of the Bank of England, takes a more dim view. He has argued that Britain’s economy was 90% the size of Germany’s before Brexit, but only 70% of its size today. Professor Jonathan Portes, a non-Brexit economist at King’s College London, described this comparison as “nonsense” because it involves measuring the value of economies at prevailing exchange rates. This is not the usual method economists use to assess the relative performance of countries because comparisons are heavily influenced by currency movements. The pound, for example, is almost 10% higher than it was during the recent fall against the US dollar, but that doesn’t mean the UK economy grew by nearly 10% relative to the US last month. A recent paper by Briefings for Britain, a pro-Brexit body, offers a different perspective to Carney’s. It notes that the UK’s cumulative growth has been slightly higher than Germany’s since 2016; that trade with the EU – despite the extra bureaucratic burdens faced by small businesses – has recovered and that Britain continues to attract more foreign direct investment than any other European country. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Of course, it could be argued that the UK would have had even more investment and even higher exports if a different decision had been made on 23 June 2016. Over the years, the argument from the anti-Brexit camp has changed. Where once it was “Brexit will crash the economy” it’s now “the economy would do better if it weren’t for Brexit”. The Brexit Update (a comprehensive piece of work, well worth reading whichever side of the argument you’re on) says that these adversarial analyzes are wrong. He concludes: “A careful reading of the evidence shows that while there is still little evidence that Brexit is doing much to help the UK economy, there is no evidence of much damage either.” This is true. There was no Armageddon. The economy is adjusting, even if that process has been made more difficult by the pandemic, the war and Liz Truss’ short tenure as prime minister. If the effects of Brexit tend to be exaggerated, then the impact of the pandemic and the lockdowns that accompanied it tend to be understated, perhaps because the most ardent anti-Brexiters also wanted longer and tighter lockdowns. Six years on, the argument for Brexit remains what it always was: an opportunity to look at an underperforming economy in a new light and do things differently. Whether this opportunity will be seized or lost remains to be seen, but there is no gorilla in the room, just a mouse with a loud squeak.
