There is some new research out this week that shows Scottish households are now more than £800 worse off because of the UK-wide vote for Brexit. The data is based on analysis of the average annual household spend in Scotland as calculated by the UK Government’s Office for National Statistics (ONS).
The research suggests we are actually £1269 worse off but when you strip out what would have been the expected rate of inflation had we voted Remain, it amounts to an increased cost of living of £417 per year built up since the Brexit vote.
Slow economic growth and poor high street sales have been keeping inflation down and so the UK average inflation rate for the last 12 months of 2.7% isn’t that bad. However the fact that inflation was running at 0.6% when the UK voted to Leave the EU tells a story.
EU member states mostly have faster levels of economic growth but are only experiencing 2% inflation. Ireland has benefited the most from the weak pound as it imports disproportionately more from the UK than other EU states and so its inflation rate is only 0.7%.
That leads some Brexiteers to claim it’s good for British exports and for Scottish fish, food and drink. But the traditional cheapness of imports due to a strong pound has meant that components and ingredients are often imported – its a double edged sword unless all your ingredients are manufactured or grown here.
The UK as a whole has a terrible balance of trade, even though Scotland exports more internationally than it imports and is the only nation within the UK to have experienced a positive balance of trade for 21 consecutive years.
The UK as a whole imports electronics, food clothing and other goods at an alarming rate. England’s disastrous balance of international trade in 2017 was a negative £128.2 billion whereas Scotland’s international balance of trade was positive £4.6bn.
That makes the UK’s inflation rate extremely vulnerable to currency fluctuations and increases the cost of imports, including staples such as fruit and vegetables, butter, bacon, and wine – making the trip to the supermarket more expensive each time.
As long as wages are growing faster than inflation people are not worse off but figures out today from the High Pay Centre suggest that FTSE100 CEO earnings are rising six times faster than the average worker, 11% per annum versus just 1.7%, and that’s less than inflation.
Also, the exponentially growing group of people on zero hours contracts and volatile temporary work will be feeling the pain.
In other words, the gap between the secure earners and the insecure earners is going to widen significantly in the next few years. So although low unemployment is helping maintain currency brokers’ confidence in the pound, the insecurity of modern work will mean it won’t deliver the consumer spending boost they are expecting. There may be trouble ahead.
The Bank of England raised interest rates this month by 0.25% and we should expect another such rise later this year, as well as inflation to increase to over 3%.[Read more: BoE base rate rise will do nothing to head off the coming economic storm]
If October’s Brexit deal negotiations reach an impasse and indicate a potential no-deal Brexit, the pound will sink again, inflation will rise and increased interest rates will then start to slow consumer spending as consumers pay down debts rather than borrow to fuel consumption. In other words, I wouldn’t like to own shares in the high street come Christmas.
The inflation research was commissioned by the People’s Vote Campaign, a movement to have a second EU referendum in the hope that the shambolic mess of Brexit and economic damage will generate a different result.
There are some serious flaws in this thinking – almost too many to mention but chiefly amongst them is that there is no UK parliamentary majority for such a vote and the Conservative-DUP government has a mandate to Leave from their General Election manifestos as well as from the referendum result.
Scotland voted Remain and was ignored, but as long as people think that England has changed its mind, they think it’s ok to have a second referendum on the EU. That would mean the Scottish Government accepting that England gets to choose and abandoning its rightful stance that Scotland shouldn’t be dragged out of the EU against its will. That is why the Scottish Government is cool on the idea. Many of the same people, calling for a second EU referendum, won’t consider that Scotland may want to change its mind about Independence, given that all of the promises of the 2014 No campaign have been abandoned by the winners just as unethically as Vote Leave’s broken promises.
Labour have not lifted a finger to stop Brexit in Westminster at all. The right of British politics want to leave the EU because they think the EU is a socialist leaning cabal that has too many workers’ and human rights and safety standards to allow for free trade to do its job. Meanwhile the left think the EU enshrines capitalism in its members states and encourages globalisation and financialisation.
Don’t think about that too long, your head will hurt.
Another issue is that at this point the UK backing out of Brexit would make it a global laughing stock and confirm the single largest ever peacetime collapse of a nation’s international credibility.
Try selling that in the face of growing and British nationalism in England, with Union flags plastered everywhere and on everything in the shops and with a plethora of newspapers calling the PM a traitor, an EU lackey and blaming her incompetence for the fact that Brexit hasn’t worked.
The truth is that Leave would probably win again, and it’s just the opportunity that Boris Johnson needs if he wants to take over and for Nigel Farage to make a comeback. You also have to consider that any second referendum on the EU would probably only be choice of a No Deal Brexit or the PM’s softer Brexit, (there are no soft Brexits for Scotland) and in that scenario Leave is 100% certain to win. How would Theresa May keep her job as head of the Conservative party if she offers a second referendum with a Stay option?
It would be a divisive and messy campaign with demonstrations and possibly civil unrest.
The ugly face of British nationalism now thinks it has a right to say the unsayable, to be openly racist and with every day that passes Scottish people will see that the civic open and welcoming campaign for Scottish nationhood is the antidote to delusional British exceptionalism they need.
All that Theresa May has to do to avoid the chaos of a second referendum and the potential break-up of her own party and of Labour (she might not mind the latter so much) is to get a deal through Westminster in early 2019, that involves staying in the single market and customs union, and she can head off a second EU referendum. There is no way to put the jack back in the box maybe all we can hope for now is Brexit with some kind of a deal?
She has been gradually moving in that direction and to get it through she might just point out that cancelling Brexit would embolden the EU members who have always wanted to change the UK’s generous annual EU multi billion pound rebate. And what would the UK do then, threaten to leave?