Is Britain wooing EU as a bride?

Three years ago, the OBR (the UK’s official economic forecast office) reckoned that Britain’s economy was some 4% smaller than it would have been had it remained in the EU.  

Now, the latest calculations by several academic and independent institutes estimate the figure to be even higher.  Benefits include cultural exchange, career opportunities (especially for young people), and simplified travel (e.g. no roaming charges, easier paperwork).  Significantly, this shift has been gradual but relentless.  It is driven partly by demographic factors: the age profile of how people voted in 2016 was such that, 10 years later, even if nobody had changed their mind, there would be a majority in favour of EU membership.  Furthermore, it is also driven by those “Leave” voters who were not gung-ho Brexiteers realising that Brexit bears no resemblance to what was promised.  

They were told that it would be easy, save lots of money (that billions would go to the NHS) and keep access to Europe while securing wonderful new trade deals across the planet.   It is true that UK increased trade with non-EU countries (e.g. US, China, India, Australia via new FTAs), partially offsetting EU declines.  However, new deals have had minimal GDP impact so far (e.g. ~0.1% each for Japan/Australia).

A significant number of “Leave” voters have therefore changed their view, especially if they work in a sector that has been particularly affected, or if they have been irritated by the multiple little things that Brexit has made more difficult, starting from ordering small packages abroad to joining the longer non-EU queue at border checkpoints if they travel. 

Neither of these two drivers of the shift in opinion – demography and changing minds – is going to go in reverse. Such an economic loss has tangible consequences.  It would have produced an extra £80 or £90 billion every year in tax revenue.  

The government is seeking to attenuate the economic damage of Brexit by aligning with the EU single market standards and rules in various sectors, to cut red tape, paperwork and border inspections.  It is starting with agriculture and energy, hoping to move on to other sectors such as chemicals and pharmaceuticals.  

This is sensible.  But it is slow, won’t change the economic dial for years, and if it succeeds will align Britain with EU rules on which it has no say when the EU wants to change them, virtually turning the UK into a non-voting member of the EU.  

Many are beginning to ask why not go the whole way and get Britain’s seat back at the table where decisions are taken that will in any case affect it.   With Putin on one side and Trump on the other, it is becoming more obvious by the day that the interests and values of Britain and its EU neighbours converge.  

Obviously, Britain can certainly no longer rely on a supposed “Special Relationship” with the United States, a notion given its last rites by Trump.  Many economists seem to be reaching the same conclusion. As an example, Iceland is to hold a referendum in August on applying to join the EU.  

In Norway a debate has started.  Every country in the western Balkans wants to join (some are already deep into their accession negotiations), as do Ukraine and Moldova.  If, Britain insists to stay out it will look isolated and irrelevant on the world stage.  Contrarily to Neville Farage’s political creed in favour of Brexit, this has turned out to be even more costly than anticipated.   

Recalling major analyses from economists at Stanford, NBER, and others; they conclude that by 2025, Brexit reduced UK GDP by 6–8% compared to a no-Brexit scenario.  Many now see Brexit as having failed to deliver promised gains, with regret increasing over time.  Will the blushing bride step forward?

George M Mangion is a Senior Partner at PKF Malta