Brexit is a dead issue at Westminster. There are any number of issues where it is hard to separate Labour and the Conservatives, and the reluctance to reopen the 2016 referendum debate is one of them. As with tax and spending, Keir Starmer is broadly offering continuity Rishi Sunak.
That doesn’t mean the debate about leaving is over. Plenty of people still nurture the hope that the decision will be reversed and are working to that end. But any successful campaign would need to do two things: convince voters that the UK economy had become a basket case since the Brexit vote and that life for those still in the club was so much better.
Neither criterion has been met. Britain’s economic performance in the seven years since 2016 has been mediocre but not the full-on horror show that was prophesied by the remain camp during the weeks leading up to the referendum. The doomsday scenario – crashing house prices (falls of up to 18% could result, warned then chancellor George Osborne) and mass unemployment – never happened.
What’s more, after the inevitable disruption caused by leaving, there have been signs of the economy adjusting. Nissan’s decision to invest more than £1bn in its Sunderland plant with the intention of building three new electric car models is an example of that. Microsoft’s £2.5bn investment in the growing UK AI sector is another.
That’s not to say that the process is complete. Brexit provided opportunities to do things differently but those opportunities have so far not been exploited. It is a lot easier for a giant Japanese car company to make the Brexit transition than it is for a small food and drink exporting company faced with loads more red tape. But while it is convenient for those who have never quite got over being on the losing side in the referendum to brand Brexit a disaster, the reality is that it hasn’t been. Covid-19 scarred the economy deeply and the long-term costs of ill health and children missing out on school will grow over time. Even so, Brexit Britain has recovered more strongly than either France or Germany from the pandemic. Relative performance matters. The rejoin camp tends not to focus on what is happening on the other side of the Channel, and it is not hard to see why.
Back in the 1960s and 1970s, one of the key arguments for joining what was then called the Common Market was that members of the bloc were doing so much better than we were. While Britain was living on past glories, other western European countries powered ahead. The contrast was starkest with Germany, but unflattering comparisons were also made with France, the Netherlands and even Italy. Indisputably, the six countries that formed the original Common Market grew faster and had fewer structural problems.
That argument cannot be made today. Over a prolonged period, not just since the arrival of Covid-19, the EU’s economic performance has been woeful.
Fifteen years ago, the US and EU economies were of a similar size; today America’s is a third bigger. Fluctuations in exchange rates account for some of the difference, but the US is at the cutting edge of the fourth industrial revolution and the EU is not. All seven of the world’s leading tech companies – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla – are American: there is no European tech giant to match the behemoths of Silicon Valley. In 2000, the EU had a 25% share in the semiconductor market: today it is 8%. The US and China are streets ahead of Europe in the development of artificial intelligence.
A number of factors are to blame for the EU’s economic woes. The one-size-fits-all nature of the single currency is one; the lack of a federal budget to match in size that of the US is another; the adherence to neoliberal economic ideas– such as tough controls on the size of budget deficits – a third. The problems go right to the heart of the EU. Its biggest economy – Germany – is expected to contract this year and has been left with a €60bn black hole in the public finances after the country’s constitutional court ruled against the coalition government’s spending plans.
Despite its relative decline, the EU remains prosperous. It is certainly rich enough to act as a magnet for those in poorer parts of the world seeking a better life. So at the same time as its economy has struggled, the number of migrants has increased. One result has been the rise of aggressively rightwing politics. In Germany, Alternative für Deutschland (AfD) is currently second in the opinion polls with voter support running at about 22%. In France, Marine Le Pen could be the next president. Giorgia Meloni leads the most rightwing Italian government since the second world war, while in the Netherlands the anti-immigration Freedom party led by Geert Wilders won the most seats in last month’s election. Something has gone seriously awry when politics in four of the founding members of the European project have turned so ugly.
Nor are the traditionally liberal Scandinavian countries immune to this trend. Denmark – which once had one of the world’s most liberal migration regimes – has shifted from a policy of welcome and integration to one of detention and return. Sweden and Finland have both seen the emergence of ultranationalist rightwing parties.
Britain is one of the relatively few European countries to buck this trend. That’s not because economic performance has been stellar here, because it clearly hasn’t. There has been no meaningful recovery from the global financial crisis of 2008. Living standards have been squeezed hard for the past two years by the cost of living crisis, and have only just started to recover.
Nor is it because the government has been more successful in restricting migration since the referendum. Far from it. Net migration hit a record level in 2022, with a decline in the numbers arriving from the EU comfortably offset by an increase from the rest of the world. Yet, if the polls are correct, the next election will be won by a party of the centre-left rather than a party of the extreme right.
This wasn’t supposed to happen. Perhaps because Brexit provided a safety valve – unavailable elsewhere – for those who felt their concerns were being ignored, the UK has not witnessed the rise of the nasty nationalism seen across the Channel. The worrying state of EU politics explains why rejoiners face a long battle. And why the main parties in the UK are right to let sleeping dogs lie.
Larry Elliott is the Guardian’s economics editor
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