Brexit: the good, the bad, and the little bit ugly

How time doesn’t always fly. It is a long five years since the UK voted to leave the EU in the 2016 referendum and the country still seems as divided about the impacts as ever. But as a Leave voter and Brexit optimist, I’m feeling increasingly positive.

Let’s start with three things that have gone well. The first is that Brexit has actually happened. We can debate exactly what the majority wanted in 2016 until the cows come home. But Brexit meant “taking back control” of borders, laws, money, and trade policy, and none of this would be possible if the UK were still a member of the EU’s single market and customs union.

This is clearly important for democracy. The many forces that have tried to trample over the 2016 result have themselves been thwarted. But the fact that Brexit is now (mostly) done is important for the health of the economy too.

The needlessly prolonged uncertainty over the terms of the UK’s departure from the EU – or even whether Brexit would happen at all – had held back investment, trade and growth. Now that businesses finally know what they have to deal with, and the direst warnings of “Project Fear” have been confounded, a large cloud has been lifted.

Second, the UK has successfully rolled over all the major trade deals it had with third countries as an EU member, and even improved on some, while making rapid progress on signing new deals with the rest of the world. This is a significant achievement for which Liz Truss and her team at the Department for International Trade deserve huge credit. The IMF, for example, assumed it would take at least two more years even to get to where we are now.

Third, the relatively rapid roll out of the Covid vaccines illustrates the benefits of acting as a sovereign nation state again. To be clear, the UK could have done independent deals to buy vaccines and approved them more quickly even if still a full member of the EU. But it is surely no coincidence that “Brexit Britain” was the only country to do so. At the very least, the UK’s vaccine success debunks the Remainer myths that little Britain is too small to do its own trade deals, or run its own regulatory policies.

Of course, some things have gone badly too – though not as badly as many warned. It was inevitable that the increase in trade frictions with the EU would reduce the amount of trade being done (this is just basic economics). Trade between the UK and the EU did indeed fell sharply after the end of the transition period on 31 December 2020, and by much more than trade between other countries.

Fortunately, trade has since resumed as businesses have adapted to the new rules. By April, UK goods exports to the EU (even fish!) were essentially back to pre-Brexit levels, even if they were still lower than might have been expected given the recovery in EU markets.

Imports have been slower to pick up again, though this partly reflects changes in the pattern of demand due to Covid. For example, the UK is importing fewer cars, which mainly come from the EU, and more clothing and PPE, which mainly come from Asia.

The much-feared exodus of financial services jobs from the City has also turned out to be little more than a trickle.

There are many other problem areas too, especially on the services side, and small businesses have found it harder to adapt than larger ones. However, some people are far too eager to blame every problem in the UK economy on Brexit.

A good example is the shortage of workers in sectors such as hospitality. Some EU citizens who have left are finding it harder to come back to the UK. But with over five million EU citizens now having settled or pre-settled status, and the right to work here, Brexit is only playing a small part. Covid-related restrictions on international travel, as well as domestic policies such as the furlough scheme, are more important.

Almost everyone is still unhappy about the implementation of the Northern Ireland Protocol, which is an ugly mess. The Westminster government is at least partly to blame here: in their eagerness to get Brexit done, ministers were probably too keen to do a deal and worry about the details later.

However, it is the EU which has weaponised the Irish border and acted completely unreasonably. In particular, it is ridiculous to suggest that the relatively small amount of trade across the Irish border could ever be enough to threaten the integrity of the entire EU single market, especially when UK and EU standards (including for sausages) are still essentially the same. Hopefully, common sense and mutual interest will prevail, both in this area and others – such as financial services and performing arts – where gaps remain be filled.

Overall, it was always likely that the costs of Brexit would be more immediate and visible, while the benefits would take longer to come through and be spread more thinly among a larger group of people.  But there is still all to play for.

Will this government be bold enough to take full advantage of the opportunities that Brexit offers to liberalise the economy? Or will it use the new freedoms to increase state intervention and protect domestic industries? The jury is still out on that.

I suspect that the long-term economic impact of Brexit will turn out to be a lot smaller than either side predicted. But after a rocky start, the prospects are gradually brightening.

This piece was first published by Reaction on 23 June 2021

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