Boris Johnson’s exit from Number 10 will — unofficially — bring down the curtain on the Brexit fantasy. Up to now, Covid has provided a smokescreen for the damage wrought by the UK’s messy, and as yet unfinished, departure from the European Union. But the smoke is clearing and the reorientation in production and trade implicit in the process is slowly coming into view.
The chaotic scenes at Dover in recent weeks when long delays left holidaymakers and hauliers stranded in six-hour queues to board ferries was — for the public at least — the first real taste of the UK’s new “third country” status. Brexiteers blamed French authorities but the delays were caused by new post-Brexit controls which require every passport to be stamped, and according to French politician Pierre-Henri Dumont a lack of investment in Dover’s port itself, which he noted was three times smaller than its counterpart in Calais.
Trade disruption, supply shortages and double-digit inflation are unquestionably a function of the pandemic but it’s plain — even to the casual observer — that the UK’s issues are qualitatively worse than everyone else’s and that they are being compounded by Brexit.
Inflation has been consistently higher precisely because of increased regulatory burdens imposed on UK importers by Brexit.
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Post-Brexit controls on immigration have similarly compounded labour shortages. A recent government report warned that staff shortages “caused by Brexit and accentuated by the pandemic” were badly affecting the food and farming sector, with fruit suppliers often forced to leave produce rotting in the fields.
The Bank of England warned last week that the UK is now facing into the most protracted recession of any industrialised country — starting in the final quarter of this year and lasting for the whole of 2023 — and the worst cost-of-living squeeze in more than 60 years. As it raised its key interest rate to counter the current inflationary surge, it warned that UK inflation would climb to more than 13 per cent by October and remain elevated throughout much of 2023.
With wages rising at roughly half the rate of inflation, it forecast that households’ post-tax income would fall in real terms in both 2022 and 2023, even after factoring in the fiscal support the Government had announced in May. The peak-to-trough decline of more than 5 per cent in household income would be the worst on record, with data stretching to the 1960s.
The scale of the recession — measured by the fall in GDP — would not be as bad as during the financial crash, it said, but the drop in household incomes would be greater.
No country has ever enhanced itself economically by erecting trade barriers between it and its main trading partner, and not when its main trading partner happens to be the richest consumer market in the world, access to which is priority number one for big business. The UK itself is a testament to that. It colonised more than a quarter of the planet largely by commandeering trade routes.
There was perhaps a brief Brexit honeymoon — somewhere in the middle of 2021 — when Johnson’s Tory party enjoyed a commanding lead in the polls over a demoralised Labour Party; when the UK’s vaccine roll-out seemed to be ahead of those in other countries and when the nation’s soccer team enjoyed a run to the final of the men’s European Championship. It was a moment when Brexiteer nativism coalesced with wider national pride. But it was short-lived.
Recent byelection defeats for the government — particularly the one in Tiverton and Honiton, which saw an unprecedented 30 per cent swing to the Liberal Democrats — point to a sea change in the public mood. As well as suggesting Johnson’s so-called “red wall” may be reversed at the next general election, they also suggest that cost-of-living issues and economic performance have pushed Brexit politics aside.
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A recent report by the Resolution Foundation think tank — described as the most detailed assessment to date of the impact of the EU-UK Trade and Co-operation Agreement (TCA), the post-Brexit trade deal between Brussels and London, concluded that Brexit is already having a deleterious effect “on both UK openness and competitiveness”.
“Between 2019 and 2021, UK trade openness fell by eight percentage points, significantly more than in countries with similar trade profiles, such as France which experienced a two percentage point decline,” it said.
“Over the next decade, as the UK adjusts to the TCA, the UK will have 1.3 per cent lower productivity, and real wages will fall by £470 per person every year than in the absence of Brexit,” it said.
Flagging productivity has been at the core of the UK’s stumbling economic performance since the financial crisis. The addition of high energy prices, increased interest rates and Brexit-induced trade barriers threatens — in the words of economist Duncan Weldon — a “perfect storm”. And the solution offered by the UK’s would-be leader Liz Truss? Tax cuts, a sop to the Tory faithful, that may simply fan further inflation without generating a necessary bump in consumption and investment.
Drummed up in a fervour of nationalism and post-2008 populism but sold as an act of political and economic sovereignty, the Brexit project will go down as one of the great strategic errors in modern British history.
