It’s now official. Brexit has caused lasting damage to the UK economy and, with the Tories in denial, Labour needs to lead the way with a new policy agenda.
Yet it’s almost a taboo topic: the Tory government won’t admit it and Labour is understandably reluctant to rekindle old Brexit flames.
The governor of the Bank of England, the Office for Budget Responsibility (OBR) and the Organisation for Economic Co-operation and Development (OECD) all agree that, notwithstanding Covid or the Ukrainian war, Brexit is the main reason why the UK is the only economy in the G7 still below its pre-pandemic size.
Real wages fell by 2.9% following Brexit, according to the Resolution Foundation. London School of Economics researchers found Brexit triggered food price rises by 6% in the two years to the end of 2021. Business investment, dogged by post-Brexit uncertainty, has also flatlined since 2016, compared with EU and US trends.
Since 2021, trade growth has been lower for the UK than the G7 average, reflecting non-tariff barriers after Boris Johnson’s Brexit deal.
The OBR found UK trade 15% lower than if we’d remained in the EU. Tory leaders promised a new nirvana of foreign trade deals now that the UK had “broken free” of the EU. Yet among the very few new ones, Liz Truss’s much trumpeted Japan deal has actually seen exports to Japan fall by £0.4bn, or 3.2%.
Her deal with Australia has been denounced as “not actually a very good deal for the UK” by the pro-Brexit former cabinet minister George Eustice.
As for the promised “bonfire of red tape” for business, Brexit has in fact piled up extra form filling and costs for businesses attempting to access our largest and nearest market. The chemical industry has spent £2bn complying with the UK’s duplicate of the EU’s regulatory system for absolutely no benefit, leading the Treasury to admit that the UK’s Brexit divorce bill could rise to £42.5bn, up to £7.5bn higher than initially estimated.
This kind of nightmare will only be repeated for numerous other sectors of the British economy if the abominable “Brexit freedoms bill” ever reaches the statute book. This would, at the end of 2023, revoke around 3,800 EU measures, which were continued by Theresa May’s administration in order to provide business with regulatory certainty after the referendum result. The resulting chaos would also be incompatible with the requirement in Johnson’s UK-EU trade and cooperation agreement to maintain a level playing field with the single market in order for the UK to retain tariff-free access to it.
Brexit, supposed to “control” immigration, has in fact delivered both chronic labour shortages and a dramatic jump in net migration in the year to June 2022, to a record 504,000 – deeply ironic given the racist undertone to much of the Brexit campaign.
As these Brexit failings become more evident, support for Scottish independence appears to be edging up. Unless Labour does something about it, we could get independence driven at least in part by Brexit, which Nicola Sturgeon continually stresses in making her case.
Brexit is proving a disaster and if re-running a referendum is out of the question, how do we “make Brexit work”, to quote Keir Starmer?
Even if the real solution – rejoining the single market and customs union – is ruled out for the foreseeable future, there are a number of practical steps that Labour as an incoming government should prioritise.
First, rebuild trust. Nobody at the top of the EU trusts the UK any more. And why should they, after the Tories sign treaties then break them? Yet without mutual trust, problem-solving negotiations will not succeed – I know that, as a former Europe minister.
Like ironing out unnecessary travel restrictions (such as the “90 days limit in any 180 days” for UK citizens, whether on business or for tourism, to the Schengen area).
More urgent is sorting out the Northern Ireland protocol, which triggered a collapse in Stormont self-government. Having investigated the protocol as a member of a Lords committee for over a year, I know how that can be done, but it requires give and take on both sides, especially less fundamentalism and more straight dealing by the UK.
Building on the EU-UK trade agreement, we need to ensure continuation of a “level playing field” on regulation. Enabling, for example, Nissan Sunderland to continue exporting 70% of its production to Europe.
Cooperation on energy policy is essential, including on net zero and on security of supply (as we depend on imports from mainland Europe for around a third of our energy).
Britain faces a multiplicity of crises that can only be overcome in cooperation with our immediate European neighbours: catastrophic climate change, the Ukraine war, economic growth, energy affordability and security.
It’s high time that we all confronted the Brexit fantasy of a “sovereign global Britain”. The writing is on the wall. Our destiny lies, if not within, then certainly with Europe – and Labour needs practical policies to deliver that. Something, given the current prosperity-killing shambles, that even Brexit voters would surely welcome?
• Lord Hain is a former Labour cabinet minister. His new thriller The Elephant Conspiracy: corruption, assassination, extinction is published by Muswell Press
