Friday 24 November 2023

An Autumn Statement of Britain's foregone future

The staggering success of Brexit in transforming Britain’s economic prospects has been such that in his Autumn Statement speech the Chancellor mentioned it, well, just once, and that to refer to the fatuous “Brexit Pubs Guarantee”. This is the policy, first trailed in Rishi Sunak’s 2021 budget, and which came into force last August, whereby duty on a pint of beer bought in a pub is guaranteed to be less than when bought in a shop. As Brexit benefits go, this might be thought rather meagre but, in fact, it’s not even a Brexit benefit, as it could have been done whilst being a member in the EU.

The reticence was scarcely surprising, though. In making a statement putting heavy emphasis on the need to boost business investment, Jeremy Hunt could hardly mention that, just the day before, the Deputy Governor of the Bank of England had told the Commons Treasury Select Committee that the decision to leave the EU had “chilled business investment” ever since the referendum. Nor, in putting heavy emphasis on the need for economic growth, was he likely to refer to the Office for Budget Responsibility’s (OBR) forecast from April 2023 that Brexit will cause UK GDP to be 4% a year lower than it would otherwise have been by 2035, even though that forecast was explicitly left unchanged in its analysis accompanying this Autumn Statement.

Hunt certainly wasn’t likely to challenge the OBR’s estimate, as Trade Secretary Kami Badenoch did the other week, since one of the big lessons learnt from Truss’s mini-budget catastrophe, which brought him to the Treasury, is that the OBR’s forecasts are crucial to gain market legitimacy. So trying to pick holes in one of those forecasts would open a can of worms that every Chancellor who follows the hapless Kwasi Kwarteng will want to remain tightly closed.

The long hand of Trussonomics

That is a reminder that, although it seems a long time ago, it is only a year since Truss’s ‘true Brexit budget’ (£) meltdown and the first Sunak-Hunt Autumn Statement that followed. At that time, I wrote that the effect of those events was to begin to break the silence about the economic damage of Brexit. That was true, so far as it went, although it hasn’t persisted to the same degree, perhaps in part because Brexit has been subsumed into the long list of things about which, as I wrote more recently, we ‘mustn’t grumble’.

It’s not just that, though. Opinion polls show that in October 2022, following the Truss debacle, 57% thought that Brexit has made the UK economy weaker than it would have been, and 11% that Brexit has made the economy stronger than it would have been, a lead for 46 percentage points for ‘weaker’, which was the highest recorded since the question was first asked in February 2022. However, in the most recent iteration of this poll, in October 2023, 49% thought ‘weaker’ and 21% thought stronger. At 28 percentage points that is still a considerable lead, but it has not only declined since its high point in October 2022 it is also the smallest lead recorded in any of the polls since the question was first asked. (The numbers responding ‘similar’ or ‘don’t know’ have remained stable throughout, at around 20% and 12% respectively).

So it looks as if the Truss mini-budget did indeed have an impact on public debate and public views about the economics of Brexit, but that this has since diminished. One reason is probably just the passage of time since the mini-budget crisis, and declining media interest in Brexit. But another may be because of the extent to which, in Conservative circles, the belief that Truss was essentially right has endured or even grown. It may not be surprising that this belief was expressed just this week by Patrick Minford (£), the ever-deluded chief economic cheerleader for Brexit and prime intellectual architect of the Truss budget. Nor is it precisely a shock that Truss herself, whose qualities do not self-evidently include that of deep introspection, should not just regard herself as blameless but in recent months have appointed herself as the standard-bearer for a ‘true Conservative’ economic policy of tax cuts and small government. But it is more surprising, given the damage she did not just to the economy but to their chances of re-election, that “so many Tories still love the failed leader”, to quote part of the headline of an insightful recent article by the Guardian’s Zoe Williams which seeks to explain Truss’s “astounding return”.

Part of Williams’ explanation relates to Brexit. She suggests that Truss and her supporters have mobilized its recurrent victimhood motif to present her as not having failed but as having been destroyed by the forces of the Blob, the Establishment – that amorphous conglomerate which, to explain Truss’s demise, has to extend even to bond market traders. This is all part of the increasingly dangerous contemporary British version of the ‘stab-in-the-back myth’ that played such an odious part in German politics after the First World War. It was on display again last week in the aftermath of Suella Braverman’s resignation.

At all events, it won’t have been lost upon Rishi Sunak that Truss’s ‘Great British Growth Rally’ upstaged him at the Tory Party’s conference, and that tax cuts are one way that he might throw some red meat to his many critics. Indeed, he even had the gall to suggest (£) that the lesson of Truss’s budget chaos lay not for the Tories but for Labour’s “dangerous” green investment plans. In any case, one of the few things known about Sunak is that he wants to be seen as an ‘instinctive tax-cutter’ and his political hero is Nigel Lawson, Thatcher’s Chancellor in the 1980s

In this way, there is now a peculiar alignment within which tax cuts are seen as symbolic both of defiance of Establishment orthodoxy and of fealty to Thatcherite orthodoxy. So it’s not surprising that Sunak and Hunt conjured some up, even if they relied on a smoke and mirrors trickery that was concisely exposed by Paul Johnson of the Institute for Fiscal Studies, and were based less on any serious economic analysis and more on a desire to lay political traps for Labour at the coming election.

Certainly the right-wing press was quick to latch on to this alignment, with both the Mail and the Telegraph carrying the identical front-page headline “Biggest tax cuts since the 1980s”. The Telegraph front page also prominently featured five pundits who it promised would provide “the best comment and analysis”. Of these, one was Allister Heath, who last year lauded Kwarteng (£) for “delivering the best budget I have ever heard a British Chancellor deliver, by a massive margin”, whilst another was none other than Kwarteng himself. Truly, the best comment and analysis anyone could imagine.

The scale of the economic damage of Brexit

Nevertheless, unlike the architects of the mini-budget, neither Sunak nor Hunt could even begin to try to pretend that the Autumn Statement was about ‘delivering Brexit’, any more than they could admit how constrained it was by the ongoing damage of Brexit, the leaden divers’ boots dragging down Britain’s economy.

Further evidence of this was provided by last week’s report from the National Institute for Economic and Social Research (NIESR), entitled Revisiting the Effects of Brexit. The first line of its conclusion is that “overall, it is certain that Brexit has had a significant effect on the British economy” [my emphasis added], and the ‘headline’ summary of that effect is that, coming up to three years after the end of the transition period, UK real GDP is between 2% and 3% lower than it would have been compared with if Brexit had not occurred, and that it is forecast to be between 5% and 6% lower than it would have been by 2035 (thus, even worse than the OBR forecast of 4%). This equates to £850 per capita and £2,300 per capita respectively. The main reasons for this are the impacts on investment, productivity, and UK-EU trade.

There are several things to say about these findings. First, they are based on modelling different scenarios and, in doing so, the impact attributed to Brexit is stripped out from the impact of other shocks, primarily those of Covid and of the Ukraine War. This also means they are based on a form of ‘counterfactual modelling’ (i.e. comparing what has actually happened so far and what is forecast to happen with what might, in other scenarios, have happened or have been forecast to happen). As such, they are, of necessity, estimates but – unlike the constant attempts by pro-Brexit economists to assess the impact of Brexit by comparing actual UK performance with actual EU, Eurozone, or individual member state performance – they do address the central relevant question: is the UK economically better off or worse off outside the EU than it would have been within the EU? By definition, this question can only be answered in counterfactual terms, and of course it is the same question as that asked in the opinion polls I referred to earlier.

The NIESR model is, however, a different to another kind of counterfactual model, the widely-quoted ‘doppelgänger’ produced by John Springford of the Centre for European Reform (CER) and, in fact, it suggests that Brexit has not been as damaging as the CER model estimates. Thus the last iteration of the CER doppelgänger showed UK GDP to be 5.5% lower than it would have been by June 2022, whereas NIESR shows it to be 2.5% lower by 2023.* It should go without saying that either figure may be right, or that the true figure may be even higher than the highest estimate, or lower than the lowest estimate, but for the time being, at least, these are the best estimates available. It should also go without saying that, on any of these estimates, it represents a huge economic hit. To get a sense of its magnitude, consider that in 2019-2020 (i.e. before the pandemic created big distortions in public finances), the UK spent 1.9% of GDP on defence, 4.2% on education and 5.8% on pensioner benefits.

It's important to understand two things about the NIESR, CER and OBR estimates. One is that people sometimes wrongly think – and, when that happens, Brexiters suddenly become sticklers for analytical rigour – that these are estimates of absolute falls in GDP. They are not, they are estimates of lost growth in GDP that would otherwise have occurred. In that sense they are about a kind of invisible immiseration, the loss of what might have been. The second is that people sometimes think – and Brexiters collude in this when they talk about the Brexit impact as being one of ‘temporary adjustment’ – that what is being estimated is a one-off event. It is not. Rather, each year, every year, actual GDP is lower than it would otherwise be, with the gap between what is and what might have been gradually increasing. In that sense they are about a kind of compound invisible immiseration.

It's also important to repeat that all these studies do seek to strip out Brexit from other effects, and in doing so they recognize that the UK economy – including the specific issues of trade performance and productivity – faces many challenges other than Brexit, including some that pre-dated Brexit. This matters when reading, for example, another recent report, this time from the Boston Consulting Group (BCG) about UK trade performance and policy. For this report, whilst making many good points about the non-Brexit challenges, still finds it necessary to repeatedly make the strawman claim that “most commentary” ascribes the challenges facing UK trade to the single factor of Brexit. In fact, it is hard to think of a single serious commentator on trade or economics who does this, and, manifestly, the NIESR, OBR and CER do not.

The issue about the economic studies is simply that, as the BCG report itself states in relation to trade, although without attempting to quantify it, “Brexit has undoubtedly had a significant impact”. Quantification is useful in estimating the extent of that impact but, fundamentally, the point is that whatever other factors are in play, in a world where economic growth is hard to find, Britain, uniquely, has chosen to make it significantly harder by the addition of Brexit to these other factors. For another way to contextualize the magnitude of estimates of lost GDP growth, such as the NIESR figure of 2.5% for 2023, is to compare them with the latest OBR forecasts of what GDP growth will be: 0.6% (2023), 0.7% (2024), 1.4% (2025).

The bitter legacy of Brexit for SMEs

The BCG report also rightly highlights that the impact of Brexit has varied between sectors, identifying pharmaceutical and automotive industries as amongst those where Brexit “is likely to have been a major factor in reducing trade”. Perhaps the most important distinction to be drawn is between large and very large businesses, on the one hand, and small and medium-sized enterprises (SMEs) on the other. The reasons are fairly obvious. Larger firms had the resources to plan for and implement the changes that Brexit brought, and were often more likely to already be familiar with procedures for trading outside the single market.

There has been ample survey evidence of how hard SMEs have been hit by Brexit, and the negative impact on specific sectors and businesses has been assiduously chronicled by Peter Foster of the Financial Times, most recently in his report on the cosmetics and beauty sector (£), itself partly based on a study conducted by Oxford Economics for the British Beauty Council. Amongst other things, Foster’s report spells out that the impact of Brexit is an ongoing one, not simply a ‘shock’ to which firms ‘adjust’ – although, in some cases, it has been just that, with the adjustment being to cease trading with the EU or to cease business altogether. Yet Hunt, despite emphasizing the need to support small businesses, had nothing to say about this.

The particular impact on SMEs is sometimes acknowledged by Brexiters, such as in the recent Institute of Economic Affairs report by pro-Brexit economist Catherine McBride (aptly described by Professor Gerhard Schnyder as “a truly fascinating piece of post-truth economics”, this is what Badenoch based her critique of the OBR forecast on). But they typically downplay its significance on the basis that, precisely because they are small, the aggregate economic effect of that impact is small.

This is misguided in two ways. One is that although big firms may be better placed to deal with Brexit this doesn’t mean, as McBride blithely puts it, that they “can easily absorb any additional costs”. It is rather that, as Allianz Trade’s Head of Economic Research recently said, Brexit has “become a structural hurdle for UK exports” (the same is true of imports, and will become even more so if the latest promise to introduce UK-EU import controls next January is kept). Many big firms may indeed ‘absorb’ these costs, but they are still real, impacting on competitiveness, prices, employment, tax base or any number of other things. But it is also misguided because of the particular economic, social, communal and, indeed, emotional and psychological costs of Brexit’s impact on SMEs.

Those costs are well-illustrated in Foster’s reports, including the one on the beauty industry, which also illustrates the micro-level equivalent of the counterfactual issue in the aggregate modelling. For, as he says of Apothecary 17, a small Doncaster-based maker of male personal grooming products, the issue is not so much that it has adjusted to now being a domestically focused business, it is the ‘counterfactual’ that it might otherwise have continued to expand as an international business. That in turn has implications for the people it might have employed, the foreign currency it might have earned, the taxes it might have paid, and its resilience in the event of a domestic downturn.

There are numerous similar examples highlighted in Brexit and Businesses: In their own words, a recent European Movement (EM) report in which, along with survey results, individual SME owners and managers explain what Brexit has meant for them. Issues include not just the new complexities of trade and regulatory change, but labour shortages. Here, too, it is important to understand how SMEs often struggle more than large businesses because, although net migration figures remain at similar levels to before Brexit, the costs and bureaucracy of hiring workers from overseas are far greater than was the case under freedom of movement of people within the EU. Moreover, sectors like hospitality which are more likely to need workers who don’t qualify for visas are also more likely to have large numbers of small firms within them.

Sometimes, the profiles in the EM report are painful to read, as with that of Carol, who ran a niche bridal lingerie business in Devon. The last line is “Brexit was the final nail in the coffin of the business” (p. 12). Or that of Darren, who ran a specialist motorsport vehicle engineering firm in Cornwall and Essex. His profile concludes “our business is finished” (p. 17). These are affecting, personal stories of individual dreams shattered, whilst at the same time implicitly telling of damage to whole families and to local communities, often in ‘left-behind areas’.

It is ironic to think how fervently Tory politicians used to, and still sometimes do, declaim themselves to be the party of entrepreneurs, and to insist that small businesses were the bedrock of the British economy, and yet they presided over Brexit. Ironic, too, how so many Brexiters claimed that it was only ‘big Business’ that felt threatened by Brexit, and what mattered were the true, British, salt of the earth, small businesses, and yet now dismiss the effects on SMEs as all but irrelevant because big Business has been more able to weather the Brexit storm.

Britain limps on

Back, then, to this week’s Autumn Statement, when it was clear, though again not surprising, that the Labour Party are as taciturn as the government about the damage of Brexit. Thus Shadow Chancellor Rachel Reeves’ response speech made no mention of it at all. As if it were the seedy uncle who has to be tolerated at family get-togethers, everyone is too embarrassed to comment on the dubiously-stained mac, the off-colour jokes and the whisky-fumed breath that Brexit brings to the parties.

For the Tories, the embarrassment is the result of having been the architects of Brexit. For Labour, it is because, otherwise, they would be forced to explain why they don’t propose to seek to reverse it, even to the extent of seeking single market membership. The political reasons for that, both domestic and as regards the EU, are understandable and, in my view, justifiable. But, whether justifiable or not, they don’t change the basic fact that the country is accepting – or being forced to accept – that, year after year, it is going to get poorer and poorer than it would otherwise have been.

I’ve argued before that, even so, Labour’s post-Brexit policy is a real, if limited, alternative to that of the Tories. But no-one should think, and Labour shouldn’t pretend, that the accommodations that are possible within the Trade and Cooperation Agreement (TCA) framework will make much economic difference. Equally, as Michel Barnier has said in a recent interview (£), there’s no prospect of the EU re-visiting the basic architecture of the TCA. Yet, although Reeves made no mention of it, other Labour politicians, such as Shadow Business Secretary Jonathan Reynolds [approximately 10 minutes in], are including changes to the TCA as one of the ways a Labour government would boost growth.

And so Britain is set to limp on, if not the sick man of Europe then, at least, the only one who has shot himself in the foot. Sunak talks of making tough “long-term decisions for a brighter future”, and in his recent conference speech Keir Starmer said that under Labour “Britain will get its future back”, but the truth is that by far the biggest long-term decision of recent times was made in 2016. It wasn’t a ‘tough’ decision: it was made glibly, carelessly, almost casually. But its consequences are certainly tough, and not at all bright. What that bland and, to some, obscure little word ‘counterfactual’ in the economic estimates means is that each year those consequences will get tougher as Britain pays the growing price of a foregone future.



*The basic difference between the models, as I (a non-economist) understand it, is that the NIESR model compares UK actual and forecasted performance since Brexit with a UK counterfactual scenario in which Brexit had not happened, whereas Springford’s CER doppelgänger compares UK actual and forecasted performance since Brexit with the actual and forecasted performance of a weighted basket of economies which pre-Brexit were comparable to the UK and so is taken to be the counterfactual scenario for the UK had Brexit not happened. Springford has commented on Bluesky on how the NIESR model differs from his, and on some of the advantages and disadvantages of each. Springford’s model has been criticised by some pro-Brexit economists, and he has responded to, and rejected, their critique. Separately, Professor Jonathan Portes of King’s College London has argued that not only is their critique theoretically flawed but that their preferred model actually yields similar results to Springford’s doppelgänger.


  1. Speaking of pubs, where are the crown symbols we were supposed to be getting on pint glasses. Another Brexit benefit which has not only not materialised, but could have been achieved when in the EU.

  2. How is Lab's silence on EU or refusal to rejoin SM justifiable?

    1. Well Lab isn't silent on those things - they have ruled them out. That's justifiable, in brief, because a) to do otherwise would allow the Tories to frame the entire election in terms of Brexit, b) if, despite that, Lab fought and won the GE on that basis it would have to devote its entire efforts in government to pursuing that policy which c) because it's highly unlikely it could deliver, if only because the EU (or EFTA or whatever) would be highly unlikely to accept if there was every chance that in a few years time a new Tory government might reverse it and in that case d) Lab would have set itself up to fail on its central electoral policy. So that is why it is justifiable, in my view and, apparently, theirs. But that doesn't of course, mean that it is justified in (perhaps) your view.

    2. It's Democracy innit! The real democratic Brexit earthquake, was IMHO not the referendum but the 2019GE which returned, with a huge majority, a PM and Conservative government which was purpose-built to "Get Brexit Done", if necessary by the most devious and underhanded means (the propensity to which which Mr. Johnson and the Tories had amply demonstrated) and nothing else.
      Labour's Brexit platform was "renegotiate and referendum on the new-deal (with accept it or remain as options). They got trounced.

      Convincing the Great British Public of the manifold and lasting downsides of Brexit is actually to ask them to admit they screwed up and royally. The push-back will be great and venomous.

      Why should Labour (His Majesties Loyal Opposition) take on this mission impossible and subject itself to the resulting Flak? The GBP have a duty to educate themselves, or be helped by HMG (For the Good of the Country) .

    3. Labour has not been silent on the issue of the UK relationship with the EU.
      On July 4th 2022 Sir Keir issued a policy statement ruling out any return to the EU single market or customs union, but arguing he could remove trade and travel barriers as Prime Minister because the EU would trust him.

      Sadly this is a rehash of what Corbyn said in a guest opinion in the Guardian in Dec 2018 when he wrote that Labour would;
      1. honour Brexit (ie leave the EU) but it would negotiate:
      2. "A new, comprehensive customs union with the EU, with a British say in future trade deals".
      3. "a new and strong relationship with the single market that gives us frictionless trade, and the freedom to rebuild our economy and expand our public services"
      4. "our plan would not leave Britain as an across-the-board rule-taker of EU regulations without a say."

      Starmer new statement had 4 points and point 3 is 'a scheme for the mutual recognition of professional qualifications with the EU' and also for 'flexible labour mobility arrangements' for people making short-term business trips between the UK and EU, and for musicians and artists embarking on tours.
      These changes he claimed would allow the UK service industry to trade in the EU single market.

      Then in Sept 2023 at a conference in Montreal he returned to the topic saying;
      "Most of the conflict with the UK being outside of the [EU] arises insofar as the UK wants to diverge and do different things to the rest of our EU partners...

      "Actually we don't want to diverge, we don't want to lower standards, we don't want to rip up environmental standards, working standards for people at work, food standards and all the rest of it."

      He then promised "a major rewrite of Britain’s Brexit deal in 2025 if the Labour party wins the next general election".

      However when asked about this in an interview on LBC, Rachel Reeves insisted there would not be "dynamic alignment", where the UK follows changes from Brussels and "we are not going to be rule takers".

      Clearly Labour does not know or wilfully ignores the fact that in a single market such as those of the EU or those in the USA, Canada & Australia all members are considered as being ‘domestic’ and as such are under a single overarching law and courts.
      The EU single market is unique in that the EU is not a truly federal nation like the USA, Canada or Australia but a union of sovereign states that have pooled sovereignty only in certain defined competencies to do with trade and trade related matters.

      Membership of the EU SM with its privilege of seamless borderless trade in both goods and in services in is best thought of as a constitutional state of being and it is not a trade agreement between third parties.

      There can be no ‘close association’ or 'close alignment' with an SM, there is only membership via being a member of the EU and being under a common legal system and courts i.e. membership of the EEA alone or EEA and EU (Full Membership) and that means being under EU Treaty Law and the full acquis, under the Copenhagen Principles and under ECHC which although not an EU body EU membership requires being a member of the ECHC.

      The four freedoms including FOM are part and parcel of full borderless free trade in goods & services. There is next to no full free trade in services possible between third parties (ie in an FTA) precisely because the two have different legal systems.

  3. Congratulations, as usual. Every word of the last four paragraphs is spot on target, including the memorable characterisation of the seedy uncle whom we can't disown.
    It is a very dispiriting picture, and any possible path to meaningfully closer alignment with the EU will be a very long one. It will also call for far more honesty in our politics than we currently seem able to muster.
    It seems to me that the short period after a Labour victory in the GE will be crucial to all this. A policy of aiming for meaningful alignment would mean decisions being taken that would not be taken otherwise, and it would therefore have to be overt and explicit. In the absence of such a clear inflection point, we would inevitably drift further and further away from the EU economically (though we could well maintain good security cooperation) and it would be increasingly hard to change direction. If the issue is still kept in the 'too difficult' folder for long after the election, the possibility of changing course could quietly shrink to zero. Could you discuss this in a future blog?

  4. "But no-one should think, and Labour shouldn’t pretend, that the accommodations that are possible within the Trade and Cooperation Agreement (TCA) framework will make much economic difference."

    Indeed - as we said a few weeks ago when this subject came up. The UK has decided, glibly, to leave a trading block hat it helped to create and now appears to not want to talk about it. The UK needs to be in the Single Market to make an economic difference, but that would require accepting freedom of movement of labour. That would mean accepting that there is little evidence that FoM had the effects that its detractors claimed. It appears that it is very difficult to get these thiings accepted.

  5. Larger quoted companies tend to have a global or pan european footprint - so they were always able to sidestep Brexit damage by shifting new investment abroad - usually to the continent or China. Many of these in the high growth advanced manufacturing sectors are not household names - eg Renishaw, Spirax, Spectris, Rotork, Ricardo, Croda - but are often global leaders in key sub-sectors. Naturally, having committed shareholder funds to this expansion - they could also hardly publicly lobby against Brexit folly at the same time.
    These are also exactly the growth sectors - metrology, nanotechnology, performance and environmental testing, energy technology, speciality chemicals - where the UK should be leveraging our world leading scientific research. Instead, Brexit is an economic homing torpedo, effectively doubling down on the low value, cyclical or ex-growth sectors such as hospitality, retail, finance, construction - ensuring low growth and declining living standards and health outcomes.

  6. "Thus Shadow Chancellor Rachel Reeves’ response speech made no mention of it at all. As if it were the seedy uncle who has to be tolerated at family get-togethers, " No, no. You got that wrong. Reeves is a die-hard Brexiter. I saw an interview with her once in which she assured Red Wall constituents that Brexit was safe with her. (She proudly hails from a Leave-voting constituency.)

    To my mind, the real distortion of recent history in the public psyche is that only the Tories are to blame for Brexit. Yet even a superficial examination of Labour's attitudes towards the EU across 40 years of membership would quickly reveal that Labour are as responsible for the current mess as the Tories.

    Tony Blair, probably the last true leader of British public opinion, dodged the biggest EU decision of his premiership by letting Gordon Brown concoct 5 impossible tests before euro membership. Brexit can be traced back directly to that failure of leadership.

    Starmer (behind Corbyn) later used Gordon's template to concoct his own 5 impossible tests before Labour would compromise with the Tories on Brexit, leading directly to the Brexit deal we got. Which Starmer then whipped Labour to support. (I conclude that Starmer approved of that deal.)

    I have often rolled my eyes when reading of the hopes you place in Labour. Their "EU policies" - to the limited extent that Starmer will reveal them - are straight out of Boris' "we hold all the cards" playbook. (Barnier, in a recent interview with the FT, wished him good luck with any notions over reopening the Brexit agreements.)

    Which brings us back to the autumn statement and the OBR. The latest OBR growth forecasts for the economy have been much revised downwards. But, strangely, they remain positive. This is odd because we just learned that the UK saw a net influx of 745k people over 2023, most of them or working age, yet the economy managed a miserly growth of ... well, 0.5% (estimated). The question this prompts is will Reeves' constituents countenance the immigration required to hit the growth targets of the OBR?

    1. I totally agree with you regarding the role the Labour Party has played in the UK leaving the EU. The Labour party enabled and still enable Brexit, as much as the Conservatives, but in different, sometimes direct, but more often indirect ways. This imposed, binary choice that the UK gives itself every election is a fiction agreed upon, and is part of the underlying problem of lack of transparency in UK politics. Brexit was a solution looking to cure the problems created by successive UK governments, red team or blue team. Brexit was a symptomatic manifestation of a greater malaise that hasn't been addressed within British politics. The endless cycle of selling the 'bright future' whist at the same time destroying the present, is the modus operandi of UK politics, blue team or red team. Perpetual crisis creation and management. Break the cycle, address and engage with reality, and stop perpetuating the ludicrous paradox that the EU is simultaneously the problem and the solution to the UK's chronic incapacity to define itself post- empire and reimagine itself as a modern country with modern institutions.

    2. Agree with some of this, though by no means all. But on the specific point that Starmer's policy is 'cakeist', that's quite often said, but it's not true. The main things he's proposing (SPS deal, Mobility clause, Security cooperation) are already on offer from the EU and can be achieved within the TCA framework (so in that respect Barnier's comments (which I also cited) are not relevant). The issue with Starmer isn't that he's proposing we can have our cake and eat it, it's that the cake he rightly proposes we can have (or eat) isn't very nourishing, and isn't as nourishing as he claims it to be.

    3. Cupcakeism, perhaps? The stagflation of the UK’s ambition with regard to the EU.

    4. Chris' position (that Starmers strategy right now is probably correct) is entirely compatible with the view that Labour are also to blame for Brexit.

      I often wonder what night have happened if Labour had delivered PR in 99 and the UK had moved to fair voting system that, yes, gave Euroscepticism a share of power at certain points.

      Brexit might still have happened, but given the compromises coalitions have to make it's much more likely it would have been a soft Norway style exit with much less damage.

      Certainly the full fat ultra hard Brexit the UK has lumbered itself with would have been less likely.

      But Labour chose to keep the "winner takes all" system, and so when the Brexiters won they took everything.

    5. Labour is not blameless but otherwise I disagree strongly with most of what you write. In the final analysis the UK is a democracy and the responsibility for Brexit, IMO, rests almost exclusively with the UK voters. They voted in, with a massive majority, Mr. Johnson and a Conservative Government which was built for no other purpose than to "Get Brexit Done". And Mr. Johnson and HMG delivered exactly what their voters wanted.
      And I don't think Blair's problem was the 5 Tests for the EURO. It was more that when the eastern expansion of the EU and the FoM took place, Blair did not take advantage of the adjustment period when he could have throttled immigration from the new MS's.
      Since Immigration was the most important issue of Brexit
      (although few will admit it directly) this was (or became) at least a serious political problem.

    6. @elfred 'Cupcakeism' - excellent, I might pinch that (tho' I guess you meant 'shrinkflation'?)

    7. Indeed, I did mean shrinkflation. By all means, pinch away, consider it a humble gift for the years of excellent blogging you have provided- many thanks.

  7. Shouldn't the UK Gov avoid promotion of alcohol drinking as they also do with tobacco products?

  8. I live in the US, so I don't have a dog in the Brexit fight, but I look for your postings every Friday. They are always instructive. Thank you

    1. Same here. I observe the shenanigans from a distance and have relied on this column for a deeper understanding of the forces at work and the consequences of that one vote so many years ago. I never imagined that the course of events recorded here could be directly relevant for my own life. Yet I now live under an incoming right wing government with huge pressure from its extremists to hold a referendum on a complex constitutional issue which would cause divisions in the country not seen for decades. Now instead of reading these columns with a detached academic curiosity (and a smug satisfaction that I no longer live in the UK), I see them as a sneak preview into a possible future if populism is appeased by a mainstream political party in order to gain and hold on to power. Not so much of a fun read now but, as you say, always instructive. So grateful I found Chris Grey's Brexit analysis.

  9. Another great, depressing piece, Chris. I read the Barnier interview and he really does come across as disappointed, still, that Britain made the decision it did, whilst emphasising once again the the Single Market is not going to be cherry-picked. As he says, why does Britain think the EU gets taken seriously as an economic power by Biden & Xi?
    Also a Brexit-related economic point this week - as Nissan announces a commitment to make two new e-vehicles at Sunderland, will the Government make public the extent of the taxpayer subsidy necessary to keep Nissan employing thousands on well-paid jobs (and thousands more indirectly) in the post-Brexit UK? The answer seems to be - not so far. Funny, that, when we were assured that the post-Brexit economic benefits would be self-evident . . .

  10. Thank you Chris. Thoroughly depressing analysis of the elephant in the room of British politics. The economic drag will likely make Starmers likely reign a one term disaster.
    It seems that it could well be impossible to grow the UK out of trouble. Rising overseas immigration and only domestic SMEs success will lead to continued toxic political future. This future is like your surname.

    1. This is an underappreciated aspect of the situation. Especially in English-speaking countries, recent history is replete with situations in which the major right-wing party has shifted the Overton Window massively to the right, and when the major left-wing party finally gets voted in with a mandate to undo the damage, it turns out that they have really become at best a centrist party that do nothing except promise to be less comically corrupt and incompetent but otherwise leave the Window where it is. The left-wing voters being understandably disappointed and disillusioned, this usually results in the other lot making a roaring comeback 3-5 years later (although it was eight years in the case of Obama basing his health care reform on a Republican plan and then watering it down massively and failing to prosecute the culprits of the GFC). And with that, the damage the right-wing party did is then completely cemented. This is extremely likely to happen with Brexit.

      I understand all the problems right now, especially that rejoining simply isn't on the table. But as far as I can tell (disclosure: not a UK resident), Labour aren't even building a narrative beyond "it is what it is now, stop mentioning it, but we will make it work". This both guarantees they will be single-term, because the promise to make it work cannot be fulfilled, and means that rejoiner voters are deluded to think that Labour will do anything useful beyond more competently driving in the same direction as the Tories.

      Also underappreciated is what was mentioned further up: ultimately, in a democracy the buck stops with the voters. A majority of the voters wanted this situation, and they got it. Next time I run into somebody who claims that voting is pointless and that politicians only do what they want no matter what the electorate wants, I will whip out a world map and point at the UK. Tories promised Brexit and delivered Brexit despite all the damage it was going to cause. Labour promises to do nothing that will really make a difference on that front, and I guarantee, if voted in, that is exactly what they will do: do nothing that will really make a difference. Politicians do indeed generally deliver on their core electoral promises, for disappointing or for catastrophic. (Can't really say for better or for worse, because that isn't the current set of offers in English-speaking countries...)

  11. The British economic losses to date which are disputed in size and future losses which are not disputed to be increasing are not simple evaporation of wealth and activity but transfers out of the UK- largely transfers to the EU27 and mostly to Ireland, France, the Benelux and to some extent, Germany. The regulatory control the EU27 now has over the 50% of UK trade exports is similarly not static as new EU regulation creates more divergence irrespective of British sovereignty dickering. Only when an EU competitor seizes an opportunity to lobby unopposed in Brussels to put a British rival at regulatory or tendering disadvantage is any of this in any way "EU revenge for Brexit" .

    The rejoin campaign challenge has the political obstacle of the EU wanting to see British Tories/Farage back inside the camp only slightly less than the return of typhus. But Brexit is also of significant economic advantage to the EU in general and specific sectors and geographies in particular. The Irish FDI, French bankers, Dutch/German pharmacists et al are going to be strong lobbies to ensure their growing Brexit benefits stay where they now reside in any rapprochement irrespective of it being limited tinkering or full rejoin.

  12. The first priority for Labour must be to get the NatC Party booted out of government. I reluctantly agree that arguing to reverse Brexit could, for now, be counterproductive in that regard. But that shouldn't stop Labour politicians from stating that Brexit has brought no benefits, that it has been an utter failure. They could and should well ask, "Where are the sunlit uplands that the Brexiters promised us?" Instead, they shamelessly lie as if they had taken lessons from 'Boris' and claim that they will make Brexit work. That's like saying that they are going to promote the health benefits of having cancer, instead of fighting it.

    Nowadays, the best Brexiters can do to defend their miserable tumour of a project is to say that it is not as bad as the greatest pessimists predicted it would be. At the same time, Labour politicians are too timid to score an open goal here.

    The main reason why arguing to reverse Brexit is not opportune is because very few politicians so far have been honest enough to talk about its failure. On the contrary, there are plenty of liars among them who will claim as Brexit benefits things that could have happened regardless of Brexit. The general public thus remains uninformed, at best, by Labour and is being lied to by the Tories. It must still sink in how much money 2.5 to 5% less growth in GDP entails.

  13. Removing the Tories from government will not remove the Press from power.

  14. Great blog. I am 78 and I have never come across the word "immiseration" before. Such a great word, so apt for brexit. How could I have lived without it. I will be using it in every conversation about brexit from on. Not sure it is invisible though.

    1. Glad you liked it. By 'invisible' I just meant that when the issue is foregone GDP growth it is invisible in the sense that it is a loss of something that people never had, rather than taking away from them something they previously had. Of course, for other aspects of Brexit (e.g. loss of freedom of movement rights) it is very much visible.

  15. Suppose Labour wins the next general election. However the measures needed to dig the country out of the almighty mess that they will inherit are so unpopular that they are lucky to even last one term, as the Conservatives are well aware….

    What if Labour adopts this strategy…?

    "In these difficult times—Covid, Ukraine, Brexit—we need a House of Commons which fully represents the electorate and the nation to deal with the mess because we are all in this together.

    "We propose to hold an emergency election under Proportional Representation in order that all views get represented in the House of Commons in proportion to the number of people in this country who hold them.

    "We realise that FPTP means the Conservatives are under-represented in terms of seats in the House of Commons and that holding a PR election will increase that number. This is a small price to pay for a truly representative House of Commons."

  16. A couple of comments have mentioned the "majority" for Brexit in (especially) the 2019 election. But it was actually our voting system that produced the Parliamentary majority, not the majority of voters.

  17. That you. Once again keeping EU readers on track about latest brexity. Always happy to read well written article.

  18. I may have pointed this out before. About two years ago Denis MacShane wrote a book review in International Affairs about books on Brexit. In it he said that, when he was Minister for Europe twenty years ago, he pleaded with Tony Blair to make some positive speeches about Europe. Blair said that he couldn't do that because it would annoy Rupert Murdoch and his editors. The fact that the illogical arguments of Euro-scepticism can be traced back to then.

    1. Yes, and even further back. In my book on Brexit I argue that its roots lie in the failure over decades of pro-membership UK politicians to be publicly positive.

  19. “Overall, it is *certain* that Brexit has had a significant effect on the British economy” -- bases conclusion on counterfactuals lol. Whilst there are always winners and losers from any change in trading terms, that proponents of Brexit being significantly damaging to the British economy as a whole have to rely on make-believe is telling.

  20. Well, counterfactuals, at least if well-designed, aren't simply "make-believe". And how else can the impact of Brexit be assessed without comparing it to a 'not-Brexit' counterfactual?

    1. Counterfactuals depend profoundly on the unprovable assumptions of the analyst. They are merely idle speculations, like pondering how history would be different if Cleopatra’s nose had a different shape.

    2. That's nonsense, but if you really believe it then there's no way anyone can claim that Brexit has been beneficial to the economy either, and even your claim (assuming you are the same 'anonymous' who made it) that "there are always winners and losers from any change in trading terms" becomes impossible to sustain.

    3. No, it just means that counterfactuals are idle speculation.There are many other ways to assess economic trends and I’m amazed that you genuinely can’t think of any other way.

      It’s like saying that there is no way to assess a government except in comparison to what would’ve happened if the other lot had won the election.

    4. Well, counterfactual modelling isn’t based on ‘idle speculation’, it is based on plausible comparisons and assumptions. There is no other way of approaching questions of the specific form ‘how does Brexit compare with Brexit not having happened?’ By definition, that can only be answered counterfactually. This isn’t the same as just “assessing economic trends” in a general sense – yes there are all sorts of ways of doing that, but none of them, except a counterfactual model in some form or other, can answer a counterfactual question. In the same way, of course we can assess the performance of a government in all kinds of ways. But if we wanted to answer the specific question ‘how has government X performed compared with if we had had government Y’ then that would require a counterfactual model. In practice, people might assess a government by imagining what would have happened without it but, much more likely, they compare government X with the previous government. However, in doing so, they are implicitly relying on a counterfactual that had the previous government continued then things would have (n.b ‘would have’ = counterfactual) continued the same way. Alternatively, they might assess a government against the promises made by those who campaigned for it and we could make that a test for Brexit (if we did, it would not fare well), but doing so would not be an answer the question ‘how does Brexit compare with Brexit not having happened?’

      OK, assuming you’re are the same ‘anonymous’ as before you have now had your original comment replied to three times. You may be one of those posters, all too common on Twitter, who obtusely keep coming back over and over again to repeat the same point. Whether intended to be or not, that is irritating, especially if it comes from someone who doesn’t appear to understand what they’re talking about. It won’t be tolerated here. So any further reply from you or any other anonymous poster effectively only repeating the same point won’t be published.

  21. The FT report says that EU importers need a license to import cosmetics from the UK post-Brexit. In fact, UK (or is it GB, NI being different?) produced cosmetics sold in the EU must have a Responsible Person, either a real person or a 'legal person' (eg. a company) based in the EU who is responsible for ensuring that these cosmetic products are produced to EU standards. Almost all SMEs in the cosmetics sector act as their own Responsible Person. UK cosmetics SMEs who acted as their own Responsible Person before Brexit didn't need another Responsible Person based elsewhere in the EU, as they were obviously based in the EU.

    Post-Brexit, the UK has pretty much copied the EU system, including the requirement for a Responsible Person and the requirements to upload details of cosmetic products to an online database. Before Brexit, the UK-based Responsible Person was obviously also an EU-based Responsible Person.

    Since Brexit, UK-based cosmetics producers who want to export to the EU need to have a Responsible Person in both jurisdictions, which is clearly beyond the capacity of many SMEs in the UK cosmetics industry.

    Likewise, an EU-based cosmetics producer who wants to export to the UK would need to have a UK-based Responsible Person, as well as an EU-based one, which is beyond the capacity of many EU SMEs in the cosmetics sector.

    These barriers to trade in cosmetic products between the UK and EU have been in place since the end of the transition period, so they are already a structural hurdle for UK-EU trade, and the mooted introduction of even more UK import controls in January may make these hurdles even higher.

    I don't think the FT report gets the point about the post-Brexit requirement to have a Responsible Persons in both the UK and EU (for cosmetics producers wishing to sell in both the UK and EU markets) across. This requirement is *the* fundamental reason why so many SME cosmetics producers in both the UK and the EU have given up exporting to the other jurisdiction.

    1. This has resulted in reshoring of cosmetics production to the UK. For example the cosmetics brand Look Fabulous Forever have opened a UK factory, moving production from Italy.

  22. Thanks - a really good and helpful explanation