Whether we face Hard Brexit or No Deal, the long-run costs to the economy are likely to be more than twice that of COVID-19 – at least £2,000 per person, warns John Van Reenen (LSE). He advocates delaying the exit from to EU to avoid the impending decades-long damage to the economy and society.
And so the players in the Brexit tragedy once again twitch their puppety limbs. Negotiations are on, then off, then on again over state aid and fisheries, which comprises one-thousandth of the UK workforce. Boris Johnson looks forward to a No-Deal Brexit, nobly defending our sovereignty under the waves and the glorious liberty to spaff taxpayer money on hand-outs to his favourite firms. Expert-loathing Michael Gove terrifies business leaders with his nonchalant comparison of Brexit to moving house when to most of us it feels more like we have been forcibly evicted from our homes and are about to be chucked into a shabby B&B run by a deranged landlord.
The political actors may start actually believing their lines, and Britain lurches out of the European Union on January 1st without any agreement. More likely, however, is that some anorexic deal will limp through by the end of 2020, much as happened last year, when Johnson agreed to a de facto trade border in the Irish Sea to jettison the Irish backstop. He then won the election on the back of his diplomatic brilliance by pretending that he had not, in fact, created this border. To round off the tragi-comedy, we now have the Internal Markets Bill that tries to unstitch his promises and in the process breaks international law, ditches Britain’s reputation for keeping its word and torches the Good Friday Agreement.
Without doubt, a Hard Brexit Deal will be heralded as a great triumph of statecraft. The media will laud the tough Brexiter diplomacy, as we no longer doff our caps and tug our forelocks to Johnny Foreigner, but speak in the only language they understand – good Anglo-Saxon English, repeated often and at high volume.
But make no mistake, such a paltry Deal will be a pig paraded around in lipstick. The short-run disruption will be less, but it will be little better than No Deal in the long run. It may avoid tariffs on goods, but the main economic costs of Brexit are much more to do with the less visible barriers of red tape due to divergent rules and regulations that will hinder trade, investment and productivity.
Standard estimates suggest that the likely deal will cut more than 6 per cent off our national income – some £2,000 per person. This will swing a fiscal wrecking ball through the public finances leaving much less to spend on hospitals, GPs and care homes, for example. But under a tenth of the Brexit income cut is due to tariffs, over 90 per cent is because of the increases in red tape – for example, the gigantic lorry parks in Kent, the county formerly known as the Garden of England.
A No Deal is painful because it hits like a tsunami immediately. A Hard Brexit Deal is stealthier, domestically abusing the economy over decades.
Many government ministers believe COVID makes Brexit easier because the pandemic’s pain will swamp that of the stake driven into our European relations. It is true that when five thugs have given the UK economy a good kicking, we will feel the blows from the sixth less keenly; especially as the pain will be distributed more democratically across our sectoral limbs (Brexit whacking manufacturing and finance; Covid sickening hospitality and tourism).
But why welcome further pain when the viral consequences of “long Brexit” will be more persistent? The long-run economic costs of Brexit will likely be over twice as large as that of COVID and possible trade deals are no vaccine – the government’s own analysis suggests that any positive impacts will be small. Geography still matters when it comes to trade, and even Johnson cannot geologically shift Britain’s location.
What we have learned from COVID is how populist leaders show stunning levels of incompetence when in power. As Warren Buffett once said, ‘You never know who’s swimming naked until the tide goes out’. Johnson, like Donald Trump and Jair Bolsonaro, gained power on the back of empty sloganeering and industrial-scale mendacity. All three contracted coronavirus and their nations – Britain, America and Brazil – stand out for their catastrophic death rates.
Johnson’s cabinet members were chosen on Brexit loyalty rather than talent. The spring lockdown was delayed because he didn’t take the virus seriously enough. Cummings, his top adviser, flouted the rules when infected and made up contemptible excuses when caught, but was rewarded with the prime minister’s full support. The whiff of corruption in the awarding of contracts and other decisions swirl around this administration.
It is no surprise that public trust has leaked away. What can be done? The obvious course is to delay leaving the EU from the arbitrary 1st January 2021 deadline and reject the Taliban Leavers demanding the hardest of all possible Brexits. Recent polls suggest only 39 per cent of people still believe Brexit was right, so why inflict further trauma on the public when the economic ICU will be collapsing under winter pressures? If nothing else, Conservatives should fear a Disunited Kingdom, as nationalist sentiment explodes in Northern Ireland and Scotland, and regional resentments rise at their treatment over COVID.
This pantomime Prime Minister is an expert in making people look in the wrong direction – please, please, don’t let us get fooled: it’s never too late to think again.
This article gives the views of the author, and not the position of LSE Brexit, nor of the London School of Economics.
I have always possessed a deep scepticism about the ability of politicians to change the fundamentals of the economy or society: the best they can do, in my opinion, is create a framework in which people’s talents and virtues are mobilized, not crushed. Ringing declarations and ambitious Brexit goals are all very well, but they are crushing the life out of the United Kingdom of Great Britain and Northern Ireland. Covid-19, if anything, has demonstrated in the most cruel way that it is a great deal harder to balance the so-called Brexit vision with practical measures and persistence. I wholeheartedly endorse the author’s thesis. For the sake of this mighty country, a pause should be placed on Brexit; all available resources must be directed towards defeating the Covid-19 pandemic, Brexit can keep for another day.
“A pause should be placed on Brexit”
Once the virus has been beaten, the UK Government will have to pump money into the economy to create jobs. Will you be happy to see those jobs taken up by the unemployed of the EU under Free Movement?
The UK economy will not look good after covid but parts of the EU will be totally shot. Spain had 14% unemployment prior to covid, Greece had borrowings of 180% of GDP. The sooner we can put clear water between ourselves and those economies the better.
An other rubbish article by those that fear Brexit and freedom from the EU ;I assume most have grown up under EU brainwashing and clearly have no idea of where the EU is heading ;Even being blinded by EU tactics and malice towards our country ; I despair of the Education that our kids are getting these days all part of the plan to divide and conquer
“I despair of the education that our kids are getting these days”
It’s ‘another’ not ‘an other’
Semicolons go next to the preceding clause, and the following clause shouldn’t start with a capital letter
‘All part of the plan..’ is a new sentence.
I despair of the education some adults got too.
Great! Give it to the Brexiters as, even here, we daily see the crassness of their highly damaging cause dawning on them.
I don’t know! Some people never seem to be able to look on the bright side.
Johnstone and his merry band of incompetents are actually doing some good things. They are a) promoting (ensuring?) Irish re-unification, b) promoting (ensuring?) Scottish independence, and perhaps most of all, reducing the pretensions of England to be a ‘world power’ of any consequence, and thus limiting it’s ability to abet and further the murderous machinations of the US Empire and it’s parasitic partner, the EU.
Yeah, sounds extremist, doesn’t it, that last part? But for most third world countries such as Cuba and Syria, that is where it is at.
“Rejoice!” as Mrs T. once said.
PS. Despite my view of EU external politics, it was a very stupid act to leave it. We should have stayed inside, reaped the advantages, and tried to change it. Not of course that, as presently constituted, the UK has different external politics.
“The cost of Brexit is likely to be more than double that of COVID – it must be delayed” The title seems to be incoherent, unless you believe, as maybe the author does, that Brexit delayed is Brexit denied. Either Brexit happens on 31st December, or it is delayed, or it doesn’t happen at all. If you think that the decision taken in the EU Referendum 2016 was the right one, then I suppose you want it to happen on the 31st of December. If on the other hand you think, as I do, that the decision was probably the wrong one, then why should Brexit delayed be any cheaper than Brexit on the 31st December? In either case there will be the same economic harm as trade barriers go up, but a delayed Brexit just means more years of uncertainty. If Brexit turns out to have been a mistake, then presumably the UK will apply to rejoin at some point. But delaying Brexit would just put the whole process back, it wouldn’t make it any less damaging.
“Recent polls suggest only 39 per cent of people still believe Brexit was right” So after going through the link I get to the following Yougov page “https://docs.cdn.yougov.com/yjh58vzrw7/YG%20Trackers%20-%20EU%20Tracker%20Questions_W.pdf”: “In hindsight, do you think Britain was right or wrong to vote to leave the European Union?”. As you will gather from the above, I would probably have been in the 50% answering “Wrong” had I been in this opinion poll, rather than the 39% answering “Right”. (There were 11% Dont Knows). But that does not mean I think the referendum decision should not be implemented, because I think democracy is more important than economics. The 39% figure says nothing at all about the percentage of UK voters who want the referendum result annulled and the UK to apply to rejoin the EU.
This is the way democracy works. You agree to hold a vote on a question. You campaign for the vote to go the way you want it to go. Then, unless the result of the vote is utterly obnoxious you concede defeat and give the winners a decent chance to implement the decision. If it all goes wrong, you can campaign for another vote to reverse the decision later.
The “decent chance to implement the decision” hasn’t really happened yet. The UK only emerged from political paralysis less than a year ago, largely caused by politicians who had supported the referendum then deciding not to accept the result. After 4 years, the UK is still subject to EU laws. No-one can honestly say they know how Brexit is going to pan out yet.
Brexit can’t be delayed. Brexit has already happened, earlier in 2020. It was on 32 January 2020, at 11 pm GMT.
At present we are in a “transition” so it feels as if we haven’t left. But we did.
Why are anti-Brexiteers so obssessed with stuff like “ the pretensions of England to be a ‘world power’ of any consequence”. Nobody cares. The empire is gone. What “the English” want is a reasonable standard of living and to be left alone in peace in an accountable democratic state. Not blue passports, imperial nostalgia or any of the other tedious Remainer clichés…
Really? Well, why do we now actually have blue passports? Someone cared enough to get them, and it wasn’t just a casual whim. As for Empire nostalgia, go into any charity shop in England and look at the second hand books – it’s all Spitfires and Commandos, defeating Rommel, and sinking the Bismarck, endlessly re-cycled from book clubs whose main stock is Spitfires, Commandos etc. etc.
“The UK only emerged from political paralysis less than a year ago, largely caused by politicians who had supported the referendum then deciding not to accept the result.”
Unfortunately, the post referendum opposition to the result emboldened the EU to take a hard line stance on negotiations. The fantasy of some Remainers that they could override the democratic process has damaged the national interest and left us with a Prime Minister who otherwise would never have made the grade.
“No-one can honestly say they know how Brexit is going to pan out yet.”
The potential state of Europe in the aftermath of the covid crisis may make the Brexit result look astute. We may not be in a good state then but our comparative position may look strong.
I think you’ll find that a lot a flag-wavers care, along with the so-called ‘government’ and the Foreign Office. OK – not very many others do, but these people all have loud voices
Brexit happened at the end of January.
Transition period will end on December 31, 23 hrs. It can’t be delayed, the date is set by an international treaty.
Only in UK you will find the possibility to permanently shift and modify laws by government decree. You’re now living in a gentle but real dictorship where HMG does as it pleases. Parliament willfully renounced it’s rights.
To change the date you would need to reopen WA, gain accord of European council and gain accord of European Parliament. It would be an extraordinary feat to succeed given no one trust the written words of HMG outside of Britain, see IMB.
It is a scary thought, that Brexit will cost more after the Covid pandemic. It is also ironic that the European Resilience Fund is helping Businesses all over the UK during these Unpresedented times. Maybe we should all vote again on Brexit in another year, after reviewing how to country has benefitted from the EU during this pandemic.
There is no dount that no one fully understood the full impact and consequence of leaving the EU, so maybe now is a good time to make the hard facts known the the general public. Then people can make an informed decision, either way.
You want to persuade the driver not to drive our bus off the cliff. The trouble is, the bus drove off the cliff in January, and has been nose-down in blissful free fall since then. What you’re really asking is for the ground to be moved back a bit, for inevitable impact to be delayed (hardly softened; there is no appreciable softening a bus hitting the ground from this height.) But our driver, Boris, wants the hardest, soonest, impact possible. The majority of passengers who were on the bus in 2016 asked to go over the cliff – and then given the opportunity to request a last-minute swerve in December 2019, they doubled down and returned him by a handsome majority.
There is now no viable path forward that doesn’t lead to a further steep decline in Britain’s wealth, power, and standing in the world: at the macro level, the path is set for a generation. By “viable” I exclude easy fantasies like 51% of the country coming to their senses and re-applying to join the EU. We need the inevitable impact to strike during Boris’s tenure, on his professed terms, so there can be no misunderstanding about the cause of Britain’s ruin. We don’t need to delay the inevitable until just before Labour wins a future election, then enable a stab-in-the-back myth about how it’s all their fault. When the youth of 2016 are old enough to understand what their grandparents did to their country, they will not thank them, they won’t agree with them. Perhaps they’ll be as angry as I am with mine. And with luck, once grandad is dead and buried, they will systematically dismantle his nostalgic imperial fantasy (why didn’t schools teach kids in the fifties that Britain’s empire was finished, and the future was going to be necessarily different – even as government planned and navigated exactly that path?) and build a new constitution from the ashes. Until then it’s going to be a cold, hungry few years.
Ever meet a Greek nationalistic? They’re extremely proud of their history, though none witnessed it and the country today has only a tenuous link to that rich past. Nice story mate, but that ended 2,000 years and what’ve you been doing since that? This is Britain’s fate, until it jettisons the past and discovers a new identity. It’s high time to paint over that old wallpaper and choose some new furniture.
A view from across the water:
As a Brit living in the EU27 and following this excruciating phase from both sides, I can tell you this boat has sailed. Nobody here even wants to contemplate a possible UK return to the EU, except under the most punitive of conditions, as one govt. official here told me.
So, the Brexiteers have won. There now follows a painful process where they learn of the folly of their ways – or not – at the expense of an entire generation of young Brits. The EU will doubtless thrive without the UK. The UK will suffer a fate similar to the Ottoman Empire: centuries of decline.