As yet another round of positive economic news comes out, the Bank of England continues to insist its intervention was responsible for propping up the British economy after the Brexit vote last summer. But in reality, this is not evidence of their actions being correct – it’s evidence of their predictions being wrong. It’s time self-proclaimed experts stopped rationalising Project Fear after the fact, admitted they were wrong, and focussed on making the best of Brexit.
It was June 24th and the FTSE was down. Instead of focusing on the joy which the ‘Leave’ vote caused, or analysing the opportunities available to a global UK outside the EU, the media focussed on perceived threats to the economy.
So-called experts were falling over themselves to declare the accuracy of their predictions. It was no longer the end of experts, but a celebration of them. Their economic predictions had been ignored by the voters and now Brexiteers’ chickens had come home to roost. Project Fear was now Project Reality. UK car manufacturing would collapse, there would be an immediate recession after the vote and 3 million jobs would be lost. The FTSE’s decline was the canary in the mine, and things could only get worse.
To this backdrop, the Governor of the Bank of England, Mark Carney, decided to take centre stage to announce the Bank of England had contingency plans. We later learnt what these contingency plans were. The cutting of interest rates to 0.25%, buying £60 billion of government bonds, a £10 billion corporate-bond buying package and £100 billion of cheap loans for banks to stimulate lending.
The FTSE fell in the immediate aftermath of the vote because of Project Fear. It was not a validation of Project Fear itself. Financial markets rely on confidence. Confidence which was eroded by David Cameron throughout the referendum. It ought to be no surprise the markets quickly bounced back once the optimistic reality of Brexit sunk in.
Almost 8 months later and the economic apocalypse is nowhere to be seen. UK car manufacturing has hit a 17-year high, unemployment is at an 11-year low and the UK’s economy grew by more than any other G7 country in the final 6 months of 2016. Now, the Bank of England is even increasing its growth and jobs forecasts for 2017.
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One would have thought the positive economic news would have led to humility amongst Project Fear forecasters. But no. The goalposts have now been moved. They claim it was not their predictions which were wrong. Instead, they claim a crisis was averted by the Bank of England.
Mark Carney – who described Brexit as the “biggest domestic risk to financial stability” during the campaign – is now being revered as somehow our saviour.
But the reason the UK’s economy continues to grow has nothing to do with Mark Carney or the cutting of interest rates. It has everything to do with the resilience of the UK’s economy and the possibility of global trade outside a protectionist EU. Tailored trade deals with large economies such as the USA have now become a possibility, rather than deals based on compromises between 28 EU Member States.
Project Fear consisted of spurious claim on top of spurious claim, and it collapsed like a house of cards, as we all knew it would. The predictions have so far proved wrong. Economist Ezra Solomon was right when he said “the only function of economic forecasting is to make astrology look respectable.”
Just like the EU’s outlandish claims about being single-handedly responsible for securing peace in Europe, Project Fear economists are now doing the exact same thing and confusing correlation and causation. Get Britain Out was confident about the economic case for Brexit throughout the referendum campaign. If only self-proclaimed experts had the same foresight.
Matthew Ellery is a Research Executive at Get Britain Out.