I was intrigued by a response on Twitter to a comment I made suggesting that MPs had voted for the UK’s economic suicide. The respondent suggested that the EU would lose badly; the UK was destined for the largest structural change in our economy since the industrial revolution. The implication was clear: the UK was in this person’s view headed for some new economic nirvana.
I will resist the temptation to allude to Ken Clarke’s belief that there are some in the UK who think we can jump down the Brexit hole and arrive in some Mad Hatter’s tea party where all is good in the world. I will, instead, presume this person is serious. In that case my question is a simple one, and is ‘why should that happen?’ I can find no reason for this.
I can, for example, see no hint of new technology on the horizon to which only we have access as a result of Brexit.
There is also no hint of a significant upturn in demand for existing goods and services: a combination of new inflation and uncertainty, plus credit already being stretched, suggests there is relatively little mileage left in the current consumer led growth.
And nor is there much sign of investment. Nissan is hinting at reversing its decision to stay. Banks are definitely planning to move, at least in part. And in the face of demand uncertainty at home and abroad, plus real inflation and interest rate rise risks there is almost no incentive for business to invest. Falling tax rates, which result in tax based incentives becoming ever more worthless, do not change that. Nor will a supposed absence of regulation: any wise business knows we will still face as much regulation as at present, but it will now come bilaterally rather than multilaterally and so be much more onerous to deal with.
So where’s this structural change going to come from? Is it from being the dirty country of Europe? The EU will certainly adjust for that in regulations. Or from being a tax haven? There’s a new EU tax haven list due soon.
I’m genuinely bemused about what might trigger optimism in this case. Any clues anyone?