With more than five years having passed since the Brexit referendum, the widespread predictions of economic chaos and collapse have failed to materialise. The UK economy has continued to grow, wages have risen, huge queues at borders have not appeared and the UK has successfully embarked on an independent trade policy. These outcomes provide a salutary lesson for the public. Not only should they ignore the claims of obviously partisan observers about key policy matters like Brexit, but they should also be wary of claims made by their own governments and supposedly independent ‘experts’ in academia and international bodies.
In the run-up to the UK’s Brexit referendum, the Minister for Europe, David Lidington, said to the House of Commons that ‘It is important that this key decision by the British people should be made on the basis of the facts’. But from the outset there was no attempt to provide the public with an even-handed assessment of the costs and benefits of EU membership.
Instead, the government, along with a wide range of academics, charities, industry lobbyists and international institutions such as the IMF and OECD fed the voters a relentless diet of exaggerated and misleading economic scare stories. Five years on, the extent of the disinformation is increasingly clear and provides a salutary if depressing lesson on how modern government works.
Here are some of the key economic claims made over the last five years:
- In 2016, the UK Treasury claimed that the short run impact of a ‘leave’ vote would include an immediate year-long economic recession, a sharp drop in house and stock prices, rising unemployment and a ‘punishment’ budget designed to fill a fiscal ‘black hole’.
- In 2016 and right up to late 2020 (just before the UK fully left the EU’s customs union and single market) many observers including the UK Treasury, the OECD, the IMF and respected academics claimed UK exports to the EU would collapse, falling by as much as 40% over the longer term due to the appearance of massive trade barriers between the UK and EU.
- Based on these trade predictions and other factors, it was claimed UK productivity growth would weaken dramatically. Largely as a result, it was claimed that the UK economy might be as much as 8-10% smaller in the long term compared to a no-Brexit scenario. Households would be £4300 per year worse off.
- It was claimed that a trade deal with the EU to replace EU membership might take a decade or more to agree, and that the UK would similarly take many years to replicate the EU’s trade deals with third countries. It was even claimed the UK would not be able to easily join the World Trade Organisation.
- It was repeatedly claimed (so often indeed that it became almost an article of faith among Remainers) that the UK’s exit from the customs union and single market would lead to ‘border chaos’ with huge queues at UK ports, leading to widespread shortages of key goods including food and medicines.
- We were told that the UK financial sector would decamp en masse to the EU as a result of leaving the single market and the loss of ‘passporting’ rights. Tens of thousands of highly paid bankers would move to Paris and Frankfurt, causing a massive decline in UK tax revenue. Financial sector job losses might run into the hundreds of thousands (see here for a particularly doom-laden account).
And here’s how things have actually developed so far:
- There was no recession after the Brexit vote. The UK economy grew 1.7% in 2016, 1.7% in 2017, 1.3% in 2018 and 1.4% in 2019. House prices grew 7% in 2016 and have grown by over 20% since 2016. Stock prices grew over 10% in the second half of 2016 (i.e., after the referendum) and are now 18% higher than in the second quarter of 2016. Unemployment declined after the referendum, to just 3.8% by end-2019. There was no ‘punishment budget’ and the UK government’s budget deficit declined between 2016 and 2019 – from 3.3% of GDP to 2.4% of GDP.
- There was no collapse in exports. After an initial decline in January 2021, UK exports to the EU have recovered strongly and are now at similar levels to where they were before the UK left the EU customs union and single market. Even sales of sensitive items like food and fish have largely rebounded after initial problems adjusting to the new systems. It is obviously too early to fully assess claims that UK exports would collapse over a 15-year horizon but five years in there are no signs of this (and note, if firms had really believed trade would collapse like this, they would have started shifting production or curtailing business with the EU long before 2021).
- No productivity slump, no crash in living standards. With no trade slump, the claimed collapse in productivity due to Brexit is also obsolete (as it was based on a contentious link between trade intensity and productivity). UK productivity growth remained positive from 2016-2019. Similarly, claims that households would be thousands of pounds a year worse off have not materialised and look unlikely to. Household real incomes are 4% higher today than at the start of 2016. Wage growth has also picked up, including in sectors where it previously was held down by an abundance of cheap EU labour. This link was generally denied by Remainers (with the notable exception of Stuart Rose in an unguarded moment).
- Trade deals have been successfully negotiated. The UK and the EU agreed the Trade and Cooperation Agreement (TCA) in late 2020 after starting negotiations in March of that year. The UK has also successfully rolled over almost all of the trade deals with third countries that it was previously party to as a result of EU membership. Rolled-over deals covered some £182 billion of trade in 2020. The UK has also expanded the trade deal with Japan and agreed a completely fresh trade deal with Australia. None of this took a decade.
- No border queues. The predicted tailbacks of thousands of trucks at UK ports completely failed to materialise, either at the start of 2021 or since. Cross-channel traffic has instead run smoothly and at similar levels to those prevailing before the UK left the EU customs union and single market.
- Minimal impact on financial services. Predictions of massive relocations of financial sector activity and jobs have proved laughably wide of the mark. Industry estimates suggest just a few thousand jobs have moved to the EU or been created there due to Brexit – and that this process has largely run its course. Actual UK employment data shows total jobs in finance and insurance have risen by 21,000 (or 1.9%) since Q2 2016. Exports of financial services have risen by 11.6% since then. London has maintained – even strengthened – its position as one of the world’s leading centres for financial services (including an over 40% global market share in FX trading). Unsurprisingly, over 1000 EU financial services firms have applied or plan to open offices in the UK.
From the above it can be seen that the lurid predictions of economic disaster from Brexit have been either invalidated by events or are well on the way to being so. You might think that, given this, Remainer lobbies in the press, politics and academia would have gone quiet. But this is not the case.
Instead, we continue to get a steady flow of disaster stories, albeit of a kind strangely disconnected from reality. Problems in small sectors or even individual firms are blown out of all proportion and blamed on ‘Brexit’ even where other causes are paramount. In place of 40% drops in exports and 10% falls in GDP we get tales of Christmas tree shortages. Academics engage in ever more tortuous efforts to prove that the UK’s economic growth is slightly slower than it might otherwise have been without Brexit. At the far end of the credibility scale, we get fake news about widespread food shortages and bizarre claims of ‘hidden border chaos’.
Meanwhile, post-Brexit achievements such as signing new trade deals are routinely rubbished as ‘insignificant’ or actually damaging to Britain’s interests. In some cases, the same lobbies that claimed such deals would take many years to agree now argue that the deals have been ‘rushed’. And in an impressive feat of intellectual gymnastics, observers who previously emphasised the crucial importance of free trade with the EU argue for protectionism against the rest of the world to shield UK firms and consumers from ‘unfair’ competition or substandard goods.
We can only hope that these ongoing fulminations are simply the final death throes of the Remainer economic disinformation movement. But we cannot be sure about that given how important the Remainer position has become to the cultural identity of an influential minority of British society. An obvious parallel here is the attachment many British intellectuals had to the Soviet Union from the 1920s through to the 1980s – an attachment that waned only slowly even as the brutality of that regime and its economic failure became clear.
The key conclusion for the person in the street is this. You cannot rely on the government, civil service, academics, international organisations or even supposed industry ‘experts’ to provide impartial views on key policy areas. The modern currency in such debates is, at best, selective and unbalanced use of evidence. At worst it is exaggeration, hyperbole, and downright misinformation. As the misleading claims about Brexit unravel one by one, voters may wish to reflect on the extent to which they can trust the claims of government and other ‘experts’ in other policy areas.