No honesty in Budget about Brexit's economic damage

When the Chancellor of the UK Exchequer Jeremy Hunt delivers his budget on Wednesday, he will trumpet whatever sticking plaster measures he and his team come up with - but don't expect any honesty about the damage that Brexit is doing to the UK economy.

The UK’s growth is stagnant while other countries are pulling ahead. That stagnation will limit the resources available to fund public services.

As Scotland exports more per head than the rest of the UK Scotland, it is suffering disproportionately from Brexit - that means budgets and purses are being painfully squeezed.

For an independent Scotland back in the EU, there will be huge potential to expand trade and grow the economy.

The FT’s Chris Giles told the respected newspaper’s daily briefing this week that:

“The economy in the UK is alone in not growing at all, not a jot between 2009 and 2025.” 

Giles explained the start of the problem was the global financial crisis of 2007-9, which affected all developed countries.

“Then after 2016 the UK continued to decline when other countries accelerated and got over the growth shock. The UK had two shocks, one a global shock and one a UK-specific shock - the Brexit referendum.”

In a "big read" in the paper, Giles accused Hunt of using "judiciously selected statistics" to claim the UK is "in the middle of the pack" when it is not.

Post-Brexit deals worth 50p per person per year

All of Boris Johnson’s new post-Brexit trade deals put together will have an economic benefit of less than 50p per person a year, and £3-£7 over 15 years, according to new research. On the other side of the ledger, official estimates from the Office for Budget Responsibility point to a Brexit loss of more than £1,250 per person over the coming years. That’s more than 178 times the most optimistic prediction for the benefits from the trade deals.

Business confidence and investment down - and uncertainty up

One issue is a decline in business investment and business confidence. Uncertainty is affecting many sectors, from farming and food production to services. The BBC Food Programme this week said that food production is falling because UK farmers are being left exposed to world markets thanks to Brexit. UK food producers are also not getting the same support with energy costs as EU countries agreed to provide,

The pound is worth a fifth less than in 2016 so that makes it harder for the UK to buy food from other countries when there is scarcity. 

The UK Government’s plan to rip up thousands of EU laws means businesses don’t know whether they will be able to export to the EU. Roger Barker, Director of Policy and Governance at the Institute of Directors, said:

“Reviewing thousands of pieces of EU-derived legislation by the end of 2023 risks creating a bureaucratic nightmare for both business and the civil service. This is the last thing that business needs.”

Drift away from the City of London

Another issue is that the City of London is becoming less “sticky” for international business since Brexit. Many UK companies are drawing up plans to shift their stock market listings to the US in a growing exodus that threatens to undermine London’s position, and will also likely affect Edinburgh. 

London’s position as a financial capital was boosted by its role as a gateway to the EU. But the financial services sector was largely left out of the Trade and Cooperation Agreement between the UK and the EU, signed in late 2020, meaning that firms lost the ability to serve EU markets under equivalent rules. There are other causes of the drift too - but Brexit has reduced London’s pull. 

British chip designer Arm chose New York for its initial public offering - founder Hermann Hauser has often warned that Brexit was a strategic mistake. CRH, the world’s biggest building materials company, last week became the latest business to seek an exit from London and boards of other companies are discussing similar moves.  Guy Hands, head of private equity group Terra Firma, told the FT that Brexit sealed the City’s fate, describing its decline as “inevitable and completely predictable”. 

Brexit is benefiting France

With Britain no longer the obvious place for international companies to place their European headquarters, France now tops it for FDI (Foreign Direct Investment).In an FT article titled: “France is the New Britain”, thought-leader Simon Kuper reported that when he asked French industry minister Roland Lescure whether Brexit was benefiting France, he replied:

“Yes, without ambiguity. We are more attractive than ever. I think Britain is less attractive than ever.”

The US bank Citigroup said last Monday that it planned to double its number of staff in Paris by building a new trading floor in the French capital, part of a gradual shift by global lenders away from London after decades of using the UK as a hub for EU business.

EU suppliers not keen to do business with the UK

Business leaders say suppliers in the EU are more cautious about doing business with post-Brexit Britain. The manufacturers’ group Make UK found that almost half of UK manufacturers in a survey of more than 100 leading industrial companies reported their EU suppliers had grown more cautious about doing business in Britain.

The UK damaged its core trading relationships through Brexit

A government Scotland did not elect has forced through a Brexit that Scotland didn’t vote for. They have damaged the economic growth Scotland would have experienced if it was tracking alongside other developed countries. That picture is getting worse as the full reality of Brexit begins to bite and the UK becomes the sick man of Europe once again. 

While Northern Ireland is protected from the worst of the long, slow decline, Scotland is fully exposed to the cold winds of the UK's disastrous Brexit  An independent Scotland back in the EU can fast-track its economy towards prosperity and effective public services. 

The chancellor will almost certainly boast that there has been growth without explaining that January's 0.3% was only a partial recovery from an 0.5% drop in December.  He won't come clean about the UK's stagnation compared to other developed countries - or the reasons for it.

As well as a failure of honesty over Brexit - the budget will fail to acknowledge Scotland's unfair treatment over energy bills - read more about that here.