Let’s start by being realistic about the economy. The UK economy depends on
- Overseas owned manufacturing who want a low regulation regime inside the EU
- The city of London and the attendant service industries.
- The M4 corridor – full of companies who want an English-speaking location with good communications to operate inside the EU.
- The M11 corridor – Hoxton roundabout / Cambridge
- A clutch of small specialist manufacturers
The UK has definitely performed better during its period inside the EU than it did before. Conservatives like to ascribe this to Mrs Thatcher (despite the disappearance of about 20% of the then UK manufacturing base within her first term). More likely it’s due to the inward investment of sections 1 and 3 above plus the rapid development of 2). These foreign owners invested in UK manufacturing in a way that the British owners refused to do post-war and they got world class productivity out of the same blokes that were always described as workshy by the Mail/Express.
It is true that before the EU we were leaders in all kinds of industries that have since fallen by the wayside – but this is more due to the incompetence of UK management which has a poor track record and the failure of successive governments to get the UK workforce to upskill themselves.
My observations over a 40-year working life is that Government, Management and the workforce themselves are all to blame in approximately equal measure. This is in stark contrast to the situation in most EU countries where technical knowhow is prized and actively worked towards. The traditional Mantra of “there’s never time to do it right but always time to do it again” could be carved on the headstone of industrial Britain. When you consider that personal mastery (i.e. getting it right first time”) is the cornerstone of Senge’s five disciplines for building a learning organisation (or country) then you can see why my prognosis for our future prosperity post Brexit is a bit gloomy.
For the last 40 years we have been subsidised by other people’s money who were attracted to be here because we had been clever enough to negotiate a relatively regulation free existence within the EU market which attracted all these good folk from around the world to come and spend and invest their money here.
This is what we (or at least the mere 37% of the electorate who voted to leave) have decided they want to throw away and what the Tory party desperate to cling onto power decided to bet their future on by ramming through something they didn’t need to – it being merely an advisory referendum in the first place.
Of course this begs the question of WHY they wanted to throw it away. I think the core reason is shown in this image which shows that the people who have benefited least from globalisation are the marginalised working classes in industrialised countries. However its only (so far) in the UK and the US that they have decided to throw the baby out with the bathwater.
So, having set the context what do I expect to happen.
I don’t suppose all of the overseas investors will leave but enough of them will to make a difference and I expect it will push tax revenues below the point where any government could address the issues of upskilling the workforce and company productivity which alone will deliver a viable future. Ireland as the remaining English speaking zone within the EU is likely to benefit – I’m not counting Malta here.
We will continue to resist knowledge and knowhow and the M11 corridor does not have sufficient critical mass to spearhead a new industrial revolution. We currently have only 4 real high tech companies in the FTSE (MicroFocus, Sage, AstraZeneca, Glaxo Smith Kline) plus I suppose BT, Worldpay and Vodaphone.
I expect our higher education and research base – and industry that generates £25 billion per annum will take a massive hit as the many overseas lecturers leave (they feel unwelcome, their status is insecure) and they will prove difficult to replace from native Brits who have effectively been priced out of studying for Masters and Doctoral positions.
So, I think the chance of our workforce acquiring 21st century skills and our companies achieving the kind of productivity gains needed to pay our way in the world is about as probably as roast icicles (to nick Solzhenitsyn’s wonderful phrase)
I know (as a horticulturalist) that the food production industry will suffer a severe hit. Many conservatives like to say that people on benefits should be forced to take such jobs. It begs the question as to whether any of the employers could afford to take them on.
I think talking about WTO rules totally misses the point. It’s not about tariffs – it’s about the certifications that products and services need to trade in certain markets.
I think the trade deals we will get will either require the net immigration that Brexiteers are opposed to (India) or will result in us being flooded by hormone sodden beef and dairy products and GM crops. (US) and that will require our legal system to be overridden by corporate interests a la TTIP which the EU managed to reject.
I think that we will be unable to defend fisheries interests outside the fishing policy – we didn’t win a cod war against Iceland in the days when we had a Navy.
I think we will revert to the steady decline in the economy and in the quality of life that was the status quo before we were in the EU and which seemed to magically reverse itself between 1985 and 2008 for those with the skills and in the industries and parts of the country that benefitted. I’m not necessarily claiming a causal relationship here.
Do I think that a devaluation in the pound will help? If you are a consumer no. If you an active exporter yes. If you are invested in overseas companies or FTSE 100 companies earning revenue abroad yes. Owners of such shares are 33% better off since Brexit.
I don’t expect this however to compensate for the general collateral damage of having most of the civil service tied up with the futility of renegotiating all kinds of things that were effectively facilitating trade and the disruption of supply chains.
I think we will lose a lot of useful people who are contributing to our society who will be hard to replace.
And I think we have already lost our reputation as a savvy diplomatic player on the world stage. It’s not survived the performance of Messrs Davis and Johnson
What will we gain?
In theory, we will retain our common law system although I’m not convinced It’s very safe with the current government. We will be able to construct a rational agricultural policy although again I don’t believe that either of our main political parties has any interest in doing that. We won’t be able to get out of a lot of restrictive practices about food and medicine which people believe is due to the EU but actually comes from Corporate America writing the WTO rulebook – I’m thinking Codex Alimentarius etc here. And we will be free to negotiate our own trade deals, should anyone be capable of doing so.
Finally we will be able to nationalise and give state aid to selective industries – which is why Corbyn (who is still clearly living in the late ‘70s) is in favour of Brexit. Given that enough people will feel sufficiently disenchanted by the next election that they might actually vote him in this is certainly a plausible mid-range possibility.
Of course people who have the skills and the entrepreneurial abilities will continue to make a living – we always do. But it will be harder work and we will have to deal with more uncertainty than before.
Of course that would still be true if the EU were to hit the buffers itself, but then we would be in a different environment where everyone knew that new trade deals had to be reached quickly rather than being on our own as a kind of diplomatic Billy No-Mates.
In summary I expect a slow decline to a not so genteel poverty and for us to remain the Milwall fans of the civilised world.
“Nobody likes us – We don’t care”
Addendum – 22/08
In the current debate there are two memes currently floating around – one is that the EU is systematically destroying service based industries and the other is that we should just walk away and go for a unilateral tariff free existence.
If we dig a little deeper it appears that this line of thought comes from the Institute of Economic Affairs whose tame academics are the old Minford / Congdon gang who used to advise the Tories in the Thatcher era and who are still unreconstructed Ricardo enthusiasts. (He believed abolition of all tariffs unilaterally was the recipe for happiness)
The outcome of this line of argument is that they are in favour of allowing the business service industries that flourish in the South East to essentially be the economy. Everyone in the “Leave” areas will have to upskill to take part in business services where the UK has an advantage or face the consequences. I’m not sure that the “abolishment of tariffs” consumer dividend (they reckon about 20% on prices) will compensate. They do talk a little bit about compensating small farmers (although as one one I’m not convinced) and supporting advanced manufacturing.
Since the people in the “Leave” areas main reason for voting for Brexit was that they felt they were left behind by the metropolitan elite (the financial rather than the liberal one) there seems to me to be little of comfort for them in a diagnosis of this type.
They are in the position of the Trumpistas who believe that fossil fuel jobs will return to the rustbelt after the world economy has moved on.
I suppose what will happen will be that when they realise what’s actually involved we shall have a leftwing Labour regime for a decade or so.
The whole issue of how we upskill the non competitive sectors to do something useful (when in my experience they feel they have a god given right to carry on doing what they’ve always done) is something that we should be seriously focusing on.
Alas Minford and his team (or indeed the current pack of rascals in their shed by the Thames) seem to have nothing sensible to say about this at all. After all anyone who has anything to do with technically based industries is already aware that we have the mother of all skills shortages which we have been plugging for years with our chums from the EU. Brexit will only make it worse.