Brexit- it
isn’t over written 20 July 21
Brexit has
largely dropped out of public awareness while the Covid pandemic takes up so much attention. However
it is very far from over and now seems a time to review. I must say I was, and
am, opposed to Brexit largely on the economic consequences. These consequences
will take some years to play out but enough is known to make an intermediate
judgement. Rather than indulge in analysis of UKIPery and related nationalist
nonsense I will try and look at the overall economic situation.
The
manufactured goods agreement saved much of UK manufacturing industry but at a
very high price. The cost of retaining some of the Japanese transplants has
been high. Nissan has demanded and received a bribe of hundreds of millions of
pounds to build a battery plant to service its Sunderland operations.
Stellantis ( the new name for Vauxhall, as the former Fiat Chrysler Peugeot is
now called ) has taken a hundred million to keep the Ellesmere Port factory
open. Despite these big subsidies Honda is closing their Swindon plant.
It has become a
feature of the new government to adopt a much more statist approach to the
economy. While public money can be a decent investment there are limits of
public finance. When Toyota come with their hands out what then? To say nothing
of Indian owned Jaguar Land Rover and a number of smaller producers. One major
problems is that the laudable intention to promote high technology sectors is
being relatively starved of resources to pay for these handouts. One
illustration is that the excellent idea to establish an English DARPA is being
handed a modest initial stake.
Manufacturing
is now roughly 10% of the UK economy and is dwarfed by the vast services sector
at about 80% with construction making up
the remaining 10% or so. The agreement with the EU excludes services. The
government has tried , and failed, to secure an agreement on “equivalence” for
the financial sector. In the past the City has been a massive part of the UK
economy. This is now shrinking fast. Much trading and investment management has
gone overseas. The only saving grace is that this has dispersed to a number of
centres, Amsterdam, Dublin, Frankfurt and Paris. All had aspired to replace
London as a financial hub. There are efforts to help London retain the rich
environment which surround the financial industry, and thus are features of the
financial business, but it remains to be seen whether these will be effective.
Outside the
financial sector the services businesses largely are internal. Any exporting
face big problems. There have been a steady drip of businesses in difficulty
reported in the news.
There has been
much talk of trade deals, supposedly to be a big bonus after Brexit. It is
perhaps a bit churlish to comment on the feeble effect thus far. These deals
will take time to negotiate and even longer to have any impact. Apart from
carryover deals where the UK does exactly the same as the EU, the flagship deal
is with Australia. Even this has been controversial in the farming community.
One can also say that a deal with resolutely Anglophile Australia should have
been a very easy negotiation.
The one that
has got away, or rather never got started, is with the USA. Johnson toadying to
Trump came too late and the Biden administration have , more or less, said not
interested.
Efforts are
rightly now focused on the multi country Pacific deal. Even though the USA
withdrew under Trump the remaining states have ( just about ) stuck together.
Tactically this would be a big win although the economic impact is probably
small.
It has been a
feature of Conservative governments to try to do more business with China. A
trade deal is very unlikely except on China’s terms and they are likely to be
very severe. Their interest is largely in technology transfer and investment.
The UK should be very wary.
A feature of
the 11th hour EU agreement was to effectively put the UK/EU border
in the North Sea. Although there are mutterings about reneging on this
agreement this is unlikely, probably illegal. The long term implication is
Irish unification which is why the so called “loyalists” are very worried.. The
continual goading of the EU by the Johnson government while playing well with
UKIP types isn’t making a compromise Northern Ireland solution any easier.
One can speculate
why Johnson is trying a scorched earth policy with the EU. One reason , apart
from playing to his gallery, may be trying to ensure there is no early
reversal. Certainly he has taken care to exclude any but committed Brexiteers
from government. While re-joining is inevitable in the long term there is
little short term prospect. A more interesting reason clearly visible in the
pro-Johnson press is whistling to keep your spirits up. The economy isn’t performing
as the Brexiteers expected but I would have thought it is early days to be
disheartened.
A final feature
of the post Brexit economy is that it turns out European workers are important.
Their numbers are higher than was expected and their roles in such as the NHS
are key. A curious feature is that many low paid jobs were filled by
immigrants. Recruiting English people to do arduous cleaning, fruit picking and
the like is difficult particularly as they are low status and poorly rewarded.
No doubt the economy is still readjusting post Covid.
Nothing I have
seen changes my view that Britain will probably split and England will slowly
become less prosperous as a result of the Brexit tragedy..
Addendum
I have long
regarded the referendum as very dubious and now Cummings, the Vote Leave strategist
has admitted to the lies told ( he prefers the term “deliberately misleading” )
The notorious 350m weekly payment to the
EU was untrue as were the imaginary
Turkish immigrants.
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