In the 18 months following the Brexit referendum, the forecasts from the Treasury, the Bank of England, the IMF, and the OECD were proven wrong.
The predicted recession, higher unemployment and a list of other calamities did not happen.
Nobel Prize winning economist professor Paul Krugman described the analysis from the Project Fear propagandists as “intellectual slumming”. Professor Patrick Minford of Economists for Free Trade (who is, in my humble opinion, the leading economist and best economic forecaster in this country) has demonstrated how the supposed “independent” economic modelling from the Treasury is just a case of “garbage in, garbage out”.
Civil servants got the answers that their political bosses wanted. The Treasury officials and other forecasters assumed that upon Brexit we would adopt the EU’s high tariff levels and retain the EU’s expensive set of regulations, whereas of course the whole point of Brexit is to escape all of this.
The best trade policy is unilateral free trade that allows us to set our own deals where the action is.
About half of this year’s growth in the global economy comes from emerging Asian economies. Some 12 per cent of our economy is trade with the EU, and only eight per cent of firms sell directly to the EU’s Single Market – but 100 per cent of the economy is subject to EU regulation.
Half of UK trade is already on WTO terms, and it is worth noting that trade in data and other services, where we have an £80bn surplus is, greater than trade in widgets. In that sense, the world is our oyster.
Beijing, not Brussels, is where it’s at. Even the European Commission itself acknowledges that 90 per cent of global trade growth is expected to come outside of the EU.
And as far as the City is concerned, no bank has moved lock, stock and barrel to Paris and Frankfurt. The fact is that London is already the world’s financial center. New York, Singapore and Hong Kong are the City’s proper competitors, not anywhere in Europe.
You also do not need a trade deal to trade. Some of the EU’s biggest trading partners do not have trade deals with the bloc.
The worst case scenario for the UK economy is to be trapped in the EU’s customs union, which was set up to protect big business, the big banks, and big farmers.
Almost as bad is to be stuck in a “transition period” in which we are subject to the primacy of EU law, “aligned” with burdensome EU regulation, and still have to cough up £10bn a year to Brussels without any vote in the European Parliament or European Council, making the UK simply a “vassal state”. Why would any democratic sovereign nation want that?
It is not as if Britain needs to panic and take any deal the EU tries to force through. The economic outlook for the UK is bright.
Rather than sinking into recession, GDP data increased 0.5 per cent in the last quarter of the year. Employment is at a record high, productivity is increasing, and UK manufacturing output extended its record run in December, rising for eight consecutive months and capping the best year since 2014.
The UK trade deficit narrowed in 2017 as exports increased by 11 per cent, and net trade made its first contribution to economic growth in six years.
For sure, the depreciation in sterling has helped, but this is what an exchange rate is designed to do by acting as a “shock absorber”. There are many countries in the Eurozone that would love to have the ability to enjoy this exchange rate effect – such as Italy, Portugal and Spain – but which are locked in the straitjacket of a “one size fits all” exchange rate and interest rate policy.
Of course, the Project Fear propagandists do not have the good grace to admit that they were wrong, and now try to explain the better position of the UK scene as being the result of a recovery in the global economy. Now even the Bank of England and others have been compelled to face facts and upgrade their economic forecasts for the UK.
Brexit is obviously not a magic cure-all for the long-term problems such as low investment. But talking down the economy does little to encourage investment either.
Rather, Brexit should be seen as a positive opportunity to promote the longer-term prosperity of the UK economy, not as a negative uncertainty.