Apparently, it is fine to trumpet when “Brexit Britain” is doing badly, but unacceptable to point out when other major economies are faring worse. The troubles of our neighbours are not a reason to cheer –but context is important.
If you want to pick the “sick man of Europe”, try Germany. The latest data show that the EU’s largest economy shrank in each of the past two quarters, as consumer spending crumbled under the weight of high inflation and a slump in real wages.
This continues a trend. Since the vote to leave the EU in 2016, the UK economy (as measured by GDP) has grown by 5.9 per cent. German GDP has only increased by 5 per cent.
Other European countries are not in much better health. The French economy has grown by 8 per cent since 2016. This is partly due to the embracing of more business-friendly policies, including cuts in corporation tax (sadly abandoned in the UK). But it also reflects massive state intervention during the energy crisis, which has hamstrung the main supplier (EDF) and saddled French taxpayers with a huge bill. France’s sovereign credit rating was downgraded by Fitch last month, with a warning that its public finances are “weaker than peers”.
Italy has posted the fastest growth of the major European economies since the pandemic. But this strong performance has been flattered by a construction boom, fuelled by subsidies and tax breaks, which has now hit the wall. Its rebound also needs to be seen in the context of the lost decade of growth since the global financial crisis: the Italian economy is still 3 per cent smaller than it was at the start of 2008.
The failure of their predictions means that Remainer doomsayers have 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 on goods trade, business investment or inflation, instead. If you carefully select the numbers and time frames, it is possible to paint a bearish picture. But there are alternative explanations (such as 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 bodies such as the IMF and OECD. There are many problems here. One is that these like-minded organisations 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 up its 2023 growth forecasts for the UK by a full percentage point – and is now predicting that the UK economy will grow faster over the next five years than those of Germany, France or Italy.
The third approach is to run mathematical models to prove that the UK economy would have done better (or less badly) had we remained in the EU. These models – such as the “doppelgänger” published by the Centre for European Reform (CER) – are based on well-established methods and should be taken seriously. However, it is hard to construct a robust counterfactual given the large global shocks of the past few years. The results also typically fail a basic “smell test”: the CER model suggests that the UK economy would have grown nearly twice as quickly since 2016 if we had voted to Remain.
Others have claimed that UK food-price inflation would have been a third lower without Brexit. But food prices have risen by about the same in the UK as in the euro area since 2019, and by a lot more in Germany.
Net migration to the UK hit a new record high last year. Whatever else you might think about this, people clearly want to come to live, work and study in “Brexit Britain”. Maybe they don’t believe the doomsayers, either.
Julian Jessop is an independent economist
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