Apparently, it’s fine to trumpet when “Brexit Britain” is going badly, but unacceptable to point out when other major economies are doing less well. The problems of our neighbors are no cause for celebration, but the context is important.
If you want to choose “the sick man of Europe”, try Germany. The latest data shows the EU’s biggest economy has contracted in each of the past two quarters as consumer spending collapsed under the weight of high inflation and falling wages real.
This continues a trend. Since the vote to leave the EU in 2016, the UK economy (measured by GDP) has grown by 5.9%. German GDP only increased by 5%.
Other European countries are not in much better health. The French economy has grown by 8% since 2016. This is partly due to the adoption of more business-friendly policies, including the reduction of corporation tax (unfortunately abandoned in the UK). But it also reflects the massive state intervention during the energy crisis, which crippled the main supplier (EDF) and slapped French taxpayers with a colossal bill. France’s sovereign credit rating was downgraded by Fitch last month, with a warning that its public finances are “weaker than those of its peers”.
Italy has recorded the fastest growth of major European economies since the pandemic. But that strong performance has been flattered by a construction boom, fueled by subsidies and tax breaks, which has now hit the wall. Its rebound must also be seen in the context of the lost decade of growth since the global financial crisis: the Italian economy is still 3% smaller than it was at the start of 2008.
The failure of their predictions meant that the remaining doomsayers had to fall back on three other types of evidence. The first is to compare the performance of the UK with other major European economies in terms of trade in goods, business investment or inflation. If you pick the numbers and timeframes carefully, it is possible to paint a bearish picture. But there are alternative explanations (like the different impacts of Covid and the energy crisis in each country) that have little to do with Brexit.
The second trick is to rely on forecasts from organizations such as the IMF and the OECD. There are a lot of problems here. The first is that these like-minded organizations have a negative view of Brexit, so this is bound to be reflected in their projections. It is also telling that the IMF has already had to revise its growth forecast for the UK for 2023 by a percentage point – and now expects the UK economy to grow faster over the next five years than those from Germany, France or Italy. .
The third approach is to run mathematical models to prove that the UK economy would have done better (or worse) if we had stayed in the EU. These models – like the “doppelgänger” published by the Center for European Reform (CER) – are based on well-established methods and should be taken seriously. However, it is difficult to construct a robust counterfactual given the major global shocks of recent years. The results also generally fail a basic ‘smell test’: the CER model suggests the UK economy would have grown almost twice as fast since 2016 if we had voted to stay.
Others have claimed that food price inflation in the UK would have been a third lower without Brexit. But food prices have risen at about the same rate in the UK as in the eurozone since 2019, and much more in Germany.
Net migration to the UK hit a new record high last year. Whatever else you think about it, people clearly want to come and live, work and study in ‘Brexit Britain’. Maybe they don’t believe in doomsayers either.
Julian Jessop is an independent economist
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