As a staunch Remainer, I was hugely disappointed by the Brexit vote. But, what’s done can’t be changed. What is the best way to respond to it?
It’s hugely tempting to accuse the Brexiteers of being racist or stupid. We share with glee how some admit that they were conned by Nigel Farage and would have voted differently. We paint nightmare scenarios of how bad a post-Brexit world will be.
But how the UK fares now is in our own hands. A post-Brexit world will only be disastrous if we allow it to be. We should respond to Brexit like any bad event. 9/11 was a disaster, but the world economy recovered sharply in 2003-2008.
Expectations are self-fulfilling. Just as self-belief helped Leicester City and Iceland punch above their weight, animal spirits and business confidence are critical to the economy. If companies stop investing and consumers stop spending, then we will indeed have a nightmare scenario – but brought on by our own doing, not by Brexit.
I’m not suggesting we drink the Kool-Aid and think things are rosy when they’re not. But instead take note of the rational reasons to be optimistic. The short-term shock of Brexit has been more muted than many feared – the FTSE 250 has barely fallen, and the Bank of England has been proactive. In most businesses, sales will be stable for the rest of the year because customers commit their orders in advance.
Turning to trade, the UK will benefit from the Single Market for at least the next two years. After that, it retains “most-favoured- nation” status – under World Trade Organisation rules, the EU can’t slam the UK with higher tariffs than it charges other non-members.
Moving to investment, firms locate in London not just for passporting rights, which can anyway be preserved by setting up a brass-plate EU subsidiary. London remains uniquely attractive due to the English language, low taxes, low regulation, and expertise in accounting and law.
However, while the short-term consequences are muted, the long-term repercussions are potentially severe. But we can mitigate them by how we respond to Brexit. Much has been written about trade, so I will focus on immigration and research.
First, Brexit need not mean that the UK turns anti-immigration – just that immigration decisions will be taken in Westminster (not Brussels) and can be targeted towards the UK’s (not the EU’s) skills shortages. However, the current points system is too blunt, with earnings playing too much of a role. A progressive immigration policy will ensure that we keep the likes of NHS nurses within the UK.
Second, the government should make it a top priority to preserve research funding. Politically, supporting universities – the supposed elite and much-maligned experts – may not be at the top of the list. But the spillover benefits are enormous.
A thriving university catalyses its region, and creates thousands of non-university jobs. Sheffield’s two universities have offset the impact of the declining UK steel industry. The output of research doesn’t just sit in a library, but spurs startups, established companies, and the public sector.
If the UK will no longer have access to European Research Council funding, it is critical that we set up a British Research Council. It is politically more appealing to use the (limited) budgetary savings from Brexit for the NHS, but research also benefits our healthcare system. Similarly, both the government and companies should fund and engage with the likes of the Big Innovation Centre, Nesta, and Innovate UK, which spearhead research efforts and connect universities, businesses, and society.
Brexit provides opportunities. One opportunity – which will surely win much fanfare – is to reduce immigration to five figures. A much less heralded, but far more important, opportunity is to develop an immigration and research strategy that is tailored to the UK, rather than the EU.
The goal of policy now should not be to write headlines, but to safeguard the UK’s future.