The Bank of England’s latest forecasts make for grim reading. While the recession projected for this year is now estimated to be a shallow one, the UK economy is nonetheless flatlining. Come 2026 the UK economy will still be smaller than it was in 2019, meaning we are set for another seven years of lost growth. This country has not known a sustained period of prosperity since before the 2008 financial crisis. Where have all the good times gone?
As with all negative economic forecasts, the news was jumped on by Brexit critics who believe leaving the EU is the reason for our stagnation. The danger of always focusing on Brexit is that it distracts from the fact that so many of our problems are caused by a range of policy failures that have nothing to do with leaving the EU and won’t be solved by re-joining.
Brexit, for example, is not the reason we don’t build enough houses or infrastructure. We don’t need to re-join the EU to implement major tax reform, improve digital connectivity and transport links or invest in education and skills. A relentless focus on Brexit underestimates the scale and diversity of the challenges we face and the wide-ranging nature of the economic reforms we need to reinvigorate this country.
In a long list entitled “the causes of the UK’s economic malaise”, Brexit – the still rippling political aftershock of the EU referendum and the way in which the result was implemented – is but one bullet point. Having said that, when developing a multi-layered strategy to reverse the UK’s economic decline, it would be foolish to ignore Brexit and continue to pretend it’s going well as the Conservative Party does so unconvincingly.
The Governor of the Bank of England, Andrew Bailey, confirmed Brexit was one of the “shocks” hitting growth and it has taken effect even faster than expected. “The long run impact seems to come through more quickly,” he said, referring to depressed trade and business investment.
This will be yet another bit of bad news pounced on by buoyant advocates of re-joining the EU, but an important part of Britain’s recovery will be dropping that whole idea and moving on. The idea of re-accession anytime soon is deeply unrealistic and unserious. The EU would never consider an application without political consensus and genuine public clamour for it consistently over the long term. Such negotiations would mean years of uncertainty and political divides would rupture, creating an abysmal environment for business and investment. We must get real.
Ideally in the long term a new legal and regulatory framework should be developed but for now we must look at what can be realistically achieved in the short to medium term. Our economic and political relationship with the EU needs a reboot but that will require a new government and the rebuilding of trust with the EU.
In the immediate short term, the Conservatives are incapable of making Brexit work but they could at least not make things worse and begin to set us on the right path. Reaching an agreement on the Northern Ireland protocol and preventing the potential chaos that could be caused by the Retained EU Law Bill would be a step in the right direction.
The impasse over the Northern Ireland protocol has overshadowed relations with the EU since we left and nothing else can be resolved until it is sorted. Reaching an agreement and then faithfully implementing it is key to rebuilding our relationship with the EU and enabling discussions about how our economic partnership can be enhanced in the future.
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The Labour Party will almost certainly form a new government with a strong majority in 2024. It must set a positive, cooperative tone and develop a new diplomatic policy that treats the EU as a strategic partner and ally. It must introduce a fresh strategy for engaging with the EU and its institutions constructively so we can move towards an improved relationship based on mutual trust and benefits.
The EU-UK Trade and Cooperation Agreement is subject to a pre-agreed review process which will begin in 2025, this is an opportunity to improve a deal that is totally inadequate for such a crucial partnership. The current situation is unsustainable and the evidence for that is clear. With public opinion decisively shifting the path is clear for renegotiation.
The Labour Party should dispense with the “f*ck business” approach and actively consult UK business to help develop better policy that meets their needs. We need to build on existing arrangements to reduce trade barriers in goods and services and create a greater degree of regulatory alignment. There must be a greater degree of cooperation in areas of shared interest embedded into the agreement across the board.
Our economic malaise is caused by a range of domestic policy failures, most of which are nothing to do with leaving the EU and all of which must be addressed. However, hard Brexit is not working. Ultimately, we need healthier and more cooperative relations with the EU and a deeper economic and political partnership. That will contribute to the economic growth we need to pay for much needed domestic reforms.
Ben Kelly is a freelance writer and a member of the Independent Commission on UK-EU Relations.
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