How Brexit may still yet deprive Boris Johnson and the Tories of power

The UK’s ability to export its way out of trouble has been much hampered by Brexit-induced trade barriers with the EU market, writes Sean O’Grady

The prime minister, Boris Johnson (John Sibley/PA) (PA Wire)

It’s an economic truth too little remarked upon that a country cannot indefinitely live beyond its means.

To do so it must rely on the kindness of the markets, overseas investors who have sufficient faith in the ability of the UK economy to prosper so mightily in the future that it can indeed pay its debts. If not, then they will shun sterling assets and the value of the pound will fall. That makes imports more expensive, exports cheaper, and redresses the trade imbalance over time.

One of the main mechanisms driving that adjustment is the way higher import prices drive inflation higher and reduce the real value of wages, which comprise roughly 70 per cent of the cost base of the British economy. Thus do living standards become squeezed, and workers and managers – on behalf of the owners of capital – come into conflict.