It’s time to face facts – we are all the poorer for Brexit

Editorial: A full four years after Brexit came into effect, the balance sheet is not looking good, whether it is for trade, investment or standards of living

No wonder the government is doing so poorly in the polls that it seems almost to have left the field in advance of the coming election (PA)

Things have come to a pretty pass when the most authoritative government response to new figures testifying to the negative economic impact of Brexit is to insist that everything could have been so very much worse. Thus Kemi Badenoch, the business and trade secretary, cited doom-laden forecasts of “inevitable decline”, which, she said, “have been proved false”.

And, yes, thank goodness, the economic meltdown predicted by some did not happen – quite, with a very near miss, and a political crisis, in relation to Northern Ireland. But the lack of a complete meltdown, either in the weeks immediately after the UK’s departure from the EU took effect, or in the four years since, can be only limited consolation in the light of the latest assessment.

The report, compiled by John Springford, an associate of the Centre for European Reform, concludes that Brexit has opened a hole of almost £100bn in annual UK exports, which is making the country worse off than if it had remained in the European Union. The estimates show that missed growth in goods and services exports means that trade is running at 30 per cent below what it could have been without Brexit.

Certain sectors, including those making sports goods, toys and medical equipment, have been particularly badly affected, largely because of border costs. Altogether, Brexit is causing what Springford calls “a permanent depression to trade between the UK and the EU”.

Now, the Centre for European Reform is a pro-EU think tank. But Springford’s economic credentials are not in doubt, and his conclusions chime with those of other recent surveys – which have, if anything, been even more negative about the extent to which the UK’s economy has been held back by Brexit. Among the most pessimistic findings have come from Cambridge Econometrics, which found that Brexit has already cost the UK economy £140bn in lost growth.

None of which is exactly good news, is it? But it gets worse. There have been knock-on effects on the standard of living, with Bloomberg estimating that GDP is 4 per cent lower than it might have been, with others citing lost investment, and a nearly £500 annual hit to UK workers’ pay – compared with what might otherwise have been expected.

No wonder the national mood tends to the resentful. No wonder the government is doing so poorly in the polls that it seems almost to have left the field in advance of the coming election.

Nor is it credible to explain the losses away as being caused entirely by external factors: the Covid pandemic, for instance, or the war in Ukraine. To be sure, these “black swan” events took a heavy toll on the UK economy. But they took a toll on many economies. Germany, for instance, upended the basic premises of its whole energy sector after Russia invaded Ukraine.

The difference is that others have, for the most part, bounced back more quickly or been able to cushion individuals and families more effectively against the shocks than have the successive post-Brexit governments in the UK.

Those who forecast that by leaving the EU, the UK was committing an enormous act of entirely avoidable self-harm are vindicated – and the extra millions promised to the NHS have not transpired. The sad truth is that the UK is poorer than it would have been had it remained in the EU or, which at one point seemed an option, remained in the single market, while leaving the EU.

One Brexiteer response is to say that Brexit was not just about the economy, and that there are some things, such as national sovereignty, that money can’t buy. But the Brexit debate and the subsequent agreements were quite a lot about the economy. And here Brexiteers’ tend to argue, as Kemi Badenoch has done, that the UK is busy negotiating and signing new trade agreements and the benefits of more economic freedom will take time to come through.

The difficulty with this is that two of the biggest hoped-for trade deals – with the United States and India – have yet to appear, with the former looking remote in the extreme. There is scant evidence, too, that the UK has been able to capitalise on its much-trumpeted freedom from EU regulation to gain a trading advantage, not least because the EU is big enough to set the regional, and even global, standard.

In this connection, it can hardly be welcome to the government that one of the mooted beneficiaries of Brexit, the agricultural sector, is now complaining – like its continental counterparts – of increasing red tape and cheap, low-grade imports. “New trade freedoms? What trade freedoms?”, they seem to say.

A full four years after Brexit came into effect, the balance sheet is not looking good, whether it is for trade, investment, or standards of living. But the public, it also appears, has no appetite at present to revisit this historic mistake.

For this government, and the next, the task will be to try to make the best of a highly regrettable decision, recognising that the immediate future will be less about soaring away into a new age of prosperity than about limiting the already considerable damage.