If Brexit is to blame for Britain’s economic woes what’s the EU’s excuse?
The Labour government is blaming Brexit for low growth but ignoring that’s it’s a phenomenon plaguing the EU as well, says Paul Ormerod
At the weekend, Bridget Phillipson became the latest leading politician to pin the economic woes of the UK on Brexit.
She recognised that youth unemployment will continue to rise but argued that this is not the fault of the current government. The problems pre-date the current administration. In particular, Phillipson singled out Brexit as a key reason.
Politicians of many different hues are only too willing to raise the spectre of Brexit as a reason underlying many aspects of poor economic performance in the UK. Phillipson is by no means alone in her strictures on the matter.
It is a highly convenient argument for the mainstream political class, absolving them as it does for direct responsibility for many problems. We can usefully think of it as the equivalent of the primary school miscreant claiming “it was a big boy who did it and he ran away”.
The problem is that the empirical evidence does not really support the view that Brexit has had a seriously negative impact on the economy.
The plain fact is that the growth rates of the major Western European economies have been very similar since 2016. And they have all been low.
The annual average rate of growth in France has been 1.2 per cent, in the UK 1.1 per cent and in Germany and Italy 0.8 and 0.7 per cent respectively. The only major Western economies to have registered a half-decent growth rate over this period have been the non-EU ones of the US, Canada and Australia, all of whom come in at around 2 per cent.
Whilst each country has features which are specific to that country, the poor growth performance is common to all the main economies of Western Europe. This strongly suggests that there are important common reasons. And Brexit is a minor phenomenon in other EU countries.
The productivity puzzle
Focusing within the UK, the key data series do not reveal a sharp negative impact of Brexit.
As I frequently write, the key economic variable is the growth in productivity. It is this which generates higher material living standards, more leisure and more revenue for the government to pay for public services.
Productivity growth since Brexit has been very low, at some 0.5 per cent a year. But this is exactly the same rate of growth we experienced in the period between the end of the late 2000s financial crisis and the Brexit vote.
It is the financial crisis which represents the watershed, the dramatic break with past performance, and not Brexit
The consequences of very low growth rates manifest themselves in the politics of these countries.
In Germany, the CDU centre-right party of Friedrich Merz is currently being annihilated, principally by the Alternative fur Deutschland. Merz came to power in the federal elections last year, in which the then governing Social Democrats received their lowest share of the vote for well over a century.
In France, Marine Le Pen of the right wing National Rally has a substantial lead in the opinion polls for the Presidential election next April, with the far left candidate Jean-Luc Melenchon pressing hard for second place.
In short, there is massive discontent with the traditional ruling political parties across Western Europe. Immigration is obviously a factor. But this gains far more traction when living standards for the average voter have at best stood still over the past 15 years.
Neither slow growth in France and Germany nor the rise of Le Pen and the AfD can remotely be pinned on Brexit. Yet, routinely, British politicians blame poor growth and the rise of Nigel Farage on Brexit. It is time for them to throw away the comfort blanket and address the real issues.
Paul Ormerod is an Honorary Professor at the Alliance Business School at the University of Manchester. You can follow him on Instagram @profpaulormerod