The future is bleak if the future is Brexit

by Bob Savic
Senior Research Fellow, Global Policy Institute

26th November 2019

As the General Election approaches, my greatest fears are now materialising – the Brexit Conservative Party will likely be re-elected with a functioning majority to take the UK out of the EU with an economically and financially-sapping withdrawal deal and no prospect of a free trade agreement with the EU anywhere on the horizon.

In the wake of this likely outcome, my view is that Britain is headed towards many years of negative economic growth and the demise of London as an international financial centre. The Brexiteers’ much-touted free trade deal with the EU will prove illusory, particularly when a Johnson government will be more concerned in concluding an FTA with the United States, alongside its much lower standards on various social, consumer, environmental and industry matters, that would make an FTA with the EU virtually impossible.

I don’t believe this will be the end of the story, however, in terms of our relations with the EU. The British public will need to understand what they are getting themselves into and what they are losing. Attention will need to be given to how parts of the UK and neighbouring EU states will significantly benefit from the UK’s post-Brexit demise, and the need to educate and galvanise the public to re-apply for membership of the European Union in a decade or so down the road.

But until that happens, which unfortunately will be for a decade or more, Paris will take over as the Single Market’s main financial hub for investment banking and financial services to EU corporations. Dublin will take away large chunks of important back office legal and asset management services, and NI, given it will benefit from ongoing single market status, will become a boom province as mainland UK manufacturing jobs and enterprises flee to set up shop there, yet still remain nominally in the UK.

Lastly, Scotland, under a Johnson premiership, will become ungovernable, as it will press for independence, potentially taking away Britain’s remaining North Sea oil/gas reserves, a substantial chunk of maritime defence, and most importantly, making Edinburgh the principal financial centre alternative for both EU and global financial & business services, that was once the exclusive preserve of the City of London.

As Scotland makes a success of extricating itself from the UK, in months and years to come, it will clearly also have the land and space to accommodate much of Britain’s (i.e. essentially Northern England and the Midlands) current manufacturing sector that will suffer as a result of increasing disparities in UK-EU product standards and other non-tariff barriers and even the possibility of being subject to EU tariffs, under WTO rules, for a very long time to come.

Meantime, the UK’s economy is set to become dangerously dependant on government spending to survive, while its manufacturing and financial services are hollowed out and transferred to all those regions that were once part of Britain, and nearby neighbouring EU states.

This clearly all sounds like doom and gloom, for England especially, but I don’t see why this won’t emerge as a realistic scenario going forward. In fact, given the disturbingly negative numbers coming out of recent forward looking indicators on the UK’s services sector, I would say we are in the early stages of such a long term economic demise.