I had an interesting discussion the other day about the problems with Brexit and forecasting the economic impact it will have, with a leading economist. It was soon clear that neither of us could find any silver lining. We agreed that we expect interest rates to rise, expect food inflation to soar and the general cost of living to rise by 10 per cent in the three years following Brexit. Expect farm businesses to go bust at record levels, matched only the percentage of people with unsecured debt, seeking debtor protection. Finance jobs will be relocated to within the EU due to the probable loss of pan-EU financial passporting, and exporting will be come far more difficult. Certain industries such as tourism, care homes, the food processing sector and IT will experience critical losses in skilled personnel if EU nationals just simply don’t feel welcome and stop coming, never mind if immigration is actually restricted.
So I asked, how come people aren’t taking to the streets to protest, and why is no one panicking? He had an interesting theory: when people face up to troubles such as too much credit card debt, it’s pretty easy to understand, they know what the problem is, they know what will happen if they can’t solve the problem and they can fixate on it, worry about it and lose sleep because they understand their predicament. But no one understands Brexit.
We have a Westminster government that doesn’t know what it’s doing, one minister says something one day and another contradicts them the next. Every professional body says that Brexit will hurt the economy but then British Nationalist politicians say that we can trade with the world, as if the EU stops that rather than facilitates it. They say we will do fine with World Trade Organisation (WTO) tariffs if the EU don’t let us have our cake and eat it too, and then food producers say they can’t trade with key markets with a sinking pound and WTO tariffs making their exports unaffordable. Even the trawler men who mistakingly like the idea of Brexit are contradicted by the onshore fish processors (who employ far more people) when they say 66 per cent of their output is exported the next day to the EU. Brexit isn’t a problem you can fixate on because no one will truly understand it till the final deal is done. Only then will all the professional bodies, think tanks and economic modellers start reporting what the final deal means. Until then Brexit will stay so utterly confusing that most people will be unable to find a rational way to react to it other than ignore it and hope it goes away – to keep on keeping on till someone tells you the game’s a bogey.
Recently I have spoken to the owner of a highland hotel with 80 per cent of his staff being EU nationals (Scots don’t apply), an IT recruitment manager who just advertised programming jobs that usually attract 30 applications, 25 of them from the EU, who now is sitting with five applicants for eight jobs and none from the EU. A confectioner who sources all of his ingredients from the EU (they can’t be sourced in the UK) so his costs have gone up 20 per cent in the last year. A fruit farmer who told me if the sun comes out in August and the fruit ripens faster it will rot in the ground as he can’t get enough EU pickers. Post a hard Brexit, whole sectors of the Scottish economy will be so short of skilled labour that words like recession and even depression don’t seem to carry enough weight.
But leaving the EU doesn’t need to be that bad; you can leave the EU and stay in the single market and the customs union, you can join EFTA and gain access to the single market. For a comparable model look at the 2014 Scottish independence prospectus. It offered to maintain currency union, the trading union the social union, to share regulations and even share some functions across the UK such as the DVLA. That essentially was a soft Scexit (sorry, won’t use that term again) but in return Scotland would have gained 80 per cent of the powers needed to deliver a bespoke economic policy matched to Scotland’s needs.
Even a hard Brexit won’t really boost Westminster’s powers by 10 per cent as the EU doesn’t really have that much power compared to Westminster and many of the powers the EU does have are often rules the UK wrote and pushed on other members. Many people still hope for a soft Brexit deal, but that would need the UK to keep paying EU trade fees at a similar level to membership, maintain open borders and freedom of movement so immigration won’t reduce and such a deal would be totally unacceptable to English and Welsh Leave voters, so either way, deal or no deal, people will take to the streets when we finally know what’s going to happen.
I can’t see how any Prime Minister could survive the economic fallout of a “no deal” situation or a soft Brexit deal due to the political fallout. Hence why there is no rush to unseat Theresa May. A Labour win at the next election would mean Corbyn as PM, a hard Brexiter who relies on ex-Ukip votes coming back to Labour due to his own Euro-sceptisim and so even if he becomes PM (he won’t) he would be captain of a sinking ship with the UK incapable of affording the social polices he supports.
A hard Brexit will see an immediate Conservative Government move to reducing banking regulation, relaxing market controls, it will lose EU employment rights to try to make industry more competitive (it wouldn’t), there would be a bonfire of rights and Corbyn is helping to make that happen. Remember TTIP, the Transatlantic Trade and Investment Partnership, a bilateral trade deal that the UK Government tried to force EU to accept, which was instantly dropped by the EU negotiators once the UK no longer held sway? Well if we end up with a hard Brexit then Theresa May will have no option but to beg Trump for TTIP on steroids, leading to US private health insurance companies running our hospitals, imported steroid-fed beef, chlorine-washed chicken and insecticide-infused GM cereals. So remember: don’t panic, not yet anyway.