Philip Rycroft / Sep 2023
Whither Brexit? With a general election in the offing, and the forthcoming review of the Trade and Cooperation Agreement, there will be much picking over the path ahead. The poor old Brexit horse is still pulling a heavy cartload of expectations and so far has been sustained by a pretty thin bag of oats – a modest trade deal here, a bit of regulatory change there, and not much else.
Most indicators would suggest that Brexit has slowed our progress as a nation, if not put it into reverse. With investment flat lining since 2016, trade intensity falling as exporters struggle to deal with the increased bureaucracy of trade with our major trading partner, and persistent labour shortages in key sectors, the least that can be said is that Brexit has not yet led us to the sunlit uplands of revitalised national prosperity.
The response of some has been to flog the Brexit horse all the harder. Lack of progress is not, it is said, the fault of the project, but the way that it has been implemented. Try a bit harder and the horse might eventually break into a trot.
There is seriously flawed thinking here. What was true on referendum day in June 2016 is still true today. The Brexit project was at best tangential to the resolution of the major issues the country faces. In practice, the net effect has been to put more obstacles on the road.
Undoubtedly the most intractable problems in this country stem from the deep inter-regional and inter-personal inequalities that so deface the UK, compounded by sclerotic growth in recent years. Take out London, and the rest of the UK is poorer than the poorest US state. Most northern European countries manage to be both wealthier and more equal than the UK. The bleak GDP statistics translate into blighted communities and far too many lives lived below their full potential.
Most would agree that growth is the answer, and that productivity is the key to growth. Nor is there any particular magic to resolving the productivity puzzle; investment in infrastructure, skills and research and development in an open and competitive market are likely to be the key ingredients in any plan to accelerate trend growth across the UK.
Governments have been struggling for decades to get the mix right. Brexit, by making it harder for businesses to export to our closest market, just makes it harder. The underlying problem runs deep and is, ultimately, a failure of consistent and robust policymaking and governance. We have witnessed over the years an endless stopping and starting of industrial strategy, the regular pulling up by the roots of skills policy, and a wearisome reinvention of regional policy, combined with lacklustre devolution of power over economic development to where it can best be exercised, at the regional and local level.
The current government is no exception to the inconsistency rule. In recent weeks we have seen mixed signalling over planning policy, backtracking on climate change commitments and further doubts over the fate of HS2. Meanwhile, it looks as though it has forgotten about its commitment to levelling up. Hardly surprising that businesses are confused.
Low growth in turn puts a drag on the public finances, just at a time when demand is surging in response to the triple challenges of an ageing population, climate change and new global instability.
In the face of these governance failures, there was a harsh logic to Brexit as shock therapy. Break the governing carapace, shatter business incumbency, and a new and buoyant nation would arise from the wreckage, or so the theory went. Policy by vandalism was never likely to be wise but it also represented a profound misreading of the temper of the nation. This school of thinking almost certainly exaggerated the constraints of EU membership on the UK’s prospects for growth, but the graver error was to look in the mirror and see a grateful nation beaming back.
The UK has generally shied away from Manichean struggle as the fulcrum for domestic policies. The frantic days of the Truss premiership completely failed to ignite popular zeal for her vision of a low tax, low regulation polity. Here was the opportunity some had been waiting for, to put spurs to the Brexit horse. Within 50 days it had ended in ignominious failure.
History may regard the Brexit vote as an uncharacteristic rush of blood to the head by a people fed up with poor governance and poor prospects. If the polls are anything to go by, the regrets are mounting. It was never a signal for a revolutionary upheaval in the affairs of the nation.
The problems that were there before Brexit remain with us now. Their resolution will come through principled, coherent and consistent policy making, ideally founded on a broad political consensus, and managed over decades, not just the political cycle. That is the challenge for the political parties as they contemplate their pitch to the electorate next year. Wiser heads will realise that the fallout of Brexit will be at best an irrelevance, at worst a hindrance. Some changes to the Trade and Cooperation Agreement may be negotiable but will make only a marginal difference. The bigger step of rejoining the Single Market and Customs Union is currently politically unthinkable. No one will have much of a clue as to how to put that poor old Brexit horse out of its misery.