Brexit sucks. But, in a good way if you’re a Daily Express reader. Yes, the pompous pencil from the 18th Century, Jacob Rees-Mogg, had asked Express readers to write into his Brexit Opportunities(!) ministerial office with suggestions as to how the UK might benefit from Brexit. Apparently, number two in the list of nine (not even 10) “top ideas” eventually published was the abolition of EU regulations restricting vacuum cleaner power to 1400 watts. No, seriously. Happy Birthday Brexit – 6-years old this week, sovereignty restored and freeeeeedom for ….. vacuums. Back in the real world there is a ministerial vacuum on Brexit benefits and 6 rather painful reminders of why, as the Financial Times put it, the Johnson cabinet “are becoming more reluctant to proclaim the economic upsides of Brexit.”

  1. Growth: OECD projections of 2023 GDP growth in the world’s top 20 economies have placed UK at the bottom of a table propped up by Russia which is engaged in its own national economic suicide pact. Exports would typically be a growth driver in GDP calculations but not even a Trump sharpie pen can deny the data and the charts showing UK exports failing to rebound in sync with other trading blocs post-Covid 19. The UK government’s own forecaster, the Office for Budget Responsibility(OBR), is sticking to its view that Brexit would ultimately reduce GDP by 4% compared to a world where the country remained in the EU. In fact, OBR data suggests that’s an annual £100 billion loss of output with additional HMRC data showing 9,000 of 27,000 UK companies previously exporting to the EU simply giving up.
  2. Business Investment: It’s all very well talking about Global Britain and “sunlit uplands” but money is the only thing which really talks. If business truly shared the UK government’s enthusiasm for negotiating a world-first reduction in trade with the world’s largest trading bloc then investment would follow. Blow that candle out. The FT is reporting that Q1 2022 real business investment was 9.4% lower than in Q2 of 2016.
  3. Currency: Sterling fell 10% after the 2016 referendum and has not recovered. Only last week the Great British “Peso” dropped below the 1.20 level versus the US dollar with research analysts at Bank of America(BOA) saying the pound is taking on “emerging market” characteristics. Furthermore, there is plenty of market chatter about hedge funds betting against the pound ahead of a potential “existential crisis”. The BOA analysts also point out that Brexit denial is not just a government phenomenon – “The challenges facing the Bank of England are unique along with a supply dynamic that it remains wholly unwilling to discuss: Brexit.”
  4. Institutions: The Brexit message of “taking back control” from Europe was laced with grandiose ambitions of “Global Britain” leadership, a return to British “values” and the sovereignty of the UK’s institutions, innit? So, possibly the most interesting article I read in recent weeks was penned by Aditya Chakrabortty in The Guardian and focused on the observations of Lord Jonathan Hill, former political secretary to Prime Minister John Major. Think back 30 years to the sterling/ERM exit humiliation, tawdry scandals and constant Maastricht sniping from the “bastards” on the backbenches. Then consider Lord Hill’s recollection that despite the relative chaos of that period, “there wasn’t a sense that all our institutions were collapsing, that Whitehall was collapsing and No. 10 didn’t work.” Wow. Chakrabortty went on to highlight three specific examples; insufficient nurses in the NHS to look after patients safely, a muzzled media(see the latest Carrie block in The Times) and a Treasury out of ideas to meet a cost of living crisis. Oh wait, the breaking news today is that No. 10 “tells ministers to ease restrictions on City bosses’ pay”. Meanwhile, the government “values” pulpit continues to preach “wage restraint” to everyone else, including workers leading the biggest rail strike in…. 30 years.
  5. Science: The development of a Covid-19 vaccine was rightly hailed as an outstanding success for the UK but the trashing of international law with unilateral legislation on the Northern Ireland Protocol does not just threaten the Good Friday Agreement. The EU has warned that British scientists will be excluded from the €95 billion Horizon research programme. This would impact thousands of academics and their current research work. A brain drain from technology and science is the last thing the UK needs. Downing Street and Big Dog’s lap dogs might dismiss this as further “Remoaner” or “Remaniac” fear-mongering but there is precedent…
  6. Labour: NHS staffing issues, airport chaos, crops rotting in fields and 1.3 million job vacancies point to a structural shift in the labour markets. This is not just a UK problem but Brexit, as every airline has been saying in recent weeks, is making it worse – an “abject failure” by a government who “couldn’t run a sweet shop” in Michael O’Leary’s typically delicate Ryanair phrasing. The sixth and final candle has been blown but hope still flickers…..

Returning to the Chakrobortty article there was a striking observation that “Right in front of our eyes, an entire political order is dying. Just as the second world war led to Clement Attlee and the 1970s produced Thatcher, so post-crash, post-pandemic Brexit Britain stands at a historic hinge point.” There may be a political consensus across the Conservative and Labour parties that there is no upside to re-visiting Brexit. In the words of the Financial Times’ George Parker, “Brexit has become the great British taboo”. And yet, there are signs a debate is brewing. These recent developments caught the eye…

  • Tobias Ellwood, a former Tory defence minister, might have noticed that both the EU and NATO is expanding in size and influence rather than shrinking. Military/defence types watch these things and Ellwood has suggested Britain should rejoin the single market to soften the cost of living crisis.
  • The bad news for Brexit Britain is that this cost of living crisis is an inflation crisis. UK inflation is currently running at more than 8%, or double the EU average. Yes, there was a tiny flaw in a Baldrick way of thinking that trading with more distant partners was a better bet than trading with those closest to you. As every business and country in the world tries to shorten the distance of its supply chain(and costs) the UK went the other longer direction. Ouch. And even some staunch Brexiteers are seeing reality. A recent article by pro-Leave Times columnist, Iain Martin, is stirring Westminster water cooler chat these days with a blunt message – “To deny the downsides of Brexit on trade with EU is to deny reality”.

The shame-free babbling of the Johnson cabinet is nothing new. The mission is clear for most of these chocolate fireguards – Save Big Dog, Save My Job – but we must be getting to a tipping point. Marina Hyde in the Guardian skewers the government in her latest article for ‘blame-shifting’:

“Of course the strikes are Labour’s fault, even though they’ve been out of power 12 years and counting. Of course lawyers are the reason they don’t have a working immigration policy. Of course there is no reason for taking responsibility for breaking your own laws – of course you couldn’t even be expected to know your own laws. People have spent way too long musing about what “Johnsonism” is when it really is transparently simple: it’s always, always someone else’s fault. And, by extension, someone else’s problem.”

The recent wishful thinking is interesting from Brexit bulldogs like Daniel Hannan, David Davis and even Jacob Rees Mogg that Brexit was supposed to be something different, but not our fault and so the benefits will be a bit longer to deliver …. say 10 years(Davis), say 50 years(Rees Mogg)…. say something! This long-term Brexit wish-fest reminds me of portfolio managers shifting the narrative of a loss-making purchase; inevitably the upside-down “trade” became a long term “investment”!

In the case of Brexit, an institutional crisis (government finances, currency?) will hopefully be the prompt for a re-set and a new consensus. Watch the language and narrative shift as the (cost of) living reality becomes too obvious to deny. Then watch “sovrinty”, culture wars and the ministry of sound-bites do a Homer Simpson shrink-into-the-bush routine as the clean-up begins. At least the vacuum cleaners will be up to the job…..