The economic doom that Remainers warned of has not materialisedby Tim Loughton / February 10, 2017 / Leave a comment
At just two clauses, the European Union (Notification of Withdrawal) Bill was one of the shortest pieces of legislation I have ever voted on in parliament. That did not deter an (increasingly fractious) group of opposition MPs tabling vexatious amendments to try to undermine its progress. One in particular caught my eye. The Scottish National Party wanted to prevent Article 50 being triggered until the Chancellor of the Exchequer, Philip Hammond, had published an economic impact assessment of the UK leaving.
The last time that happened was in May 2016, and the full weight of the government “machine,” the Civil Service, the Treasury and the Governor of the Bank of England was behind it. The then-Chancellor George Osborne prophesied catastrophe of Biblical proportions. Precisely, in bold and on the opening page of the official Treasury “analysis” document he foretold:
“A vote to leave would cause an immediate and profound economic shock creating instability and uncertainty… and the effect of this profound shock would be to push the UK into sharp recession and lead to a sharp rise in unemployment.’’
Nine months on, the heavens have not caved in, fire and pestilence have not rained on the capital and the UK economy is actually doing rather well—and is forecast to outstrip the G7 for some time to come. Virtually weekly, from the International Monetary Fund to the Bank of England, overdoses of humble pie are grudgingly consumed as previously overcautious growth forecasts are upgraded with gay abandon.
The effects of this are beginning to be seen in the real world too. Unemployment continues to fall: it is now at 4.8 per cent, its lowest level since September 2005, while employment is at a record high of 74.5 per cent, and the proportion of women in work at 69.1 per cent, the highest since records began. Wages rose at an annual rate of 2.7 per cent towards the end of last year, the strongest growth since August 2015. Retail sales in the final quarter of 2016 were up 5.9 per cent on the same period in 2015 and the services sector expanded sharply in December—at its greatest rate since July 2015.
In manufacturing the number of cars made in the UK reached a 17-year high in 2016, as 1.7m cars rolled off production lines—an increase of 8.5 per cent on 2015—whilst car exports rose by 10.3 per cent—a record for the second consecutive year.
The doom-mongers forecasting a rush to the exits for international investors have also been frustrated. Social media giant Google has committed to £1bn future investment in the UK, including 3,000 new jobs; Facebook is increasing its footfall in the UK by 50 per cent; Snapchat is establishing its non-US HQ in London where it will pay non-US taxes; Apple is establishing its new London offices at Battersea Power Station, with enough space for the company to increase its workforce to 3,000.
Our European partners seem undaunted too. Lidl is investing £70m in its new London headquarters; Dong Energy from Denmark has also committed £12bn worth of renewable energy projects in the UK by 2020 and German-owned Rolls-Royce Motor says it will keep its headquarters in the UK and continue investing here. Meanwhile the merger between the London and German stock exchanges is going ahead and German business leaders in particular have acknowledged that anything that harms the pre-eminence of the City of London, the world’s financial capital, would harm Europe. The choice is not between London and Frankfurt or Paris; it is between London and Singapore, Hong Kong or New York.
No one is saying that the next couple of years is going to be easy. Inevitably Britain will face many economic challenges. However, we start negotiations with a £70bn trade deficit with the EU, £25bn of that with Germany alone. Our largest trade surplus in the EU is with Ireland, a country we have a very close relationship with, pre-dating the EU. And we will have the flexibility, post-Brexit, to tailor our tax system and regulations to reflect changing economic climates. This is an area in which Britain is currently stifled by the EU straightjacket. We should also not forget the 6.9bn people who don’t happen to live in the EU who are increasingly enthusiastic about re-establishing direct trading links with Britain.
This week’s headlines remind us of the unresolved Greek debt crisis. The Italian banking crisis and insolvency of other euro economies has not gone away. With upcoming general elections in Holland, France, Germany and the Czech Republic, where anti-EU extremist parties are riding high, the spotlight is likely to be on uncertainty and weakness on that side of the Channel—not ours. This will create more pressure for sensible pragmatic Brexit deals to be done by European political leaders facing their electorates, who will have the final say.
Whatever petulant EU officials, smarting at Britain’s impertinence in the wake of the Brexit vote, may wish for, do we really think Angela Merkel is going to campaign on a platform jeopardising jobs amongst German car producers because of an insistence on mutual tariffs with their biggest export market, the UK? Britain has a strong hand to play after triggering Article 50. The EU needs to realise it is Britain’s intention to play it to our mutual benefit. Hopefully the overwhelming vote in support of the Brexit bill has given the prime minister recharged confidence to play that hand robustly and skillfully.