The below is the executive summary of my report for the Centre for Policy Studies, which can be fully accessed here.
Addressing the UK’s growth problem is paramount and should underpin virtually every other priority when it comes to public policy. However, contrary to recent clamour, re-joining the EU, its Single Market (SM) or Customs Union (CU) will not provide a solution to Britain’s growth challenge, and should not be part of any pro-growth strategy. The Government needs to have the confidence to stand its ground on remaining outside of EU institutions. It should do so based on an assessment of the present situation, of which there are 10 key features:
- Debates around re-joining the SM or CU overstate how good they have been for the UK in the past, and do not properly address the economic (let alone political) trade-offs re-joining either or both. It is particularly telling that the initial narrative of economic catastrophe upon leaving the EU has now become that of a ‘slow puncture’.
- Questionable statistics – including the oft-quoted (and often misunderstood) claim that our economy will be 4% smaller in 15 years’ time than if we had stayed in the EU – are distracting policymakers from the UK’s genuine economic challenges, which are deep-rooted and have little to do with the EU.
- The use of dodgy economic counterfactuals – the doppelganger approach to economic modelling – has given rise to misguided arguments about how the economy would have grown faster and how the tax take would have been higher had the UK stayed in the EU.
- The inability of British politicians (not least in the last Conservative governments) to articulate a coherent vision and deliver a properly thought-out post-Brexit economic policy has allowed figures vehemently opposed to Brexit to define the debate and helped to create an economically damaging narrative about the UK on the global stage.
- Britain does have an investment shortfall – but this problem long predates Brexit, and the apparent ‘Brexit effect’ after 2016 probably had less to do with leaving the EU per se, and more to do with the political process (chaos) of 2016-19, as a profusion of potential scenarios (including potentially reversing the referendum) led to extreme policy uncertainty.
- The turning point for economic growth was not 2016, but 2008 and some of the policies implemented in response to the global financial crisis. While some politicians wrongly presented Brexit as the solution to many of these issues, even giving the impression that it would transform the country’s fortunes overnight, we are still better placed to pursue a reforming, pro-growth agenda from outside the EU.
- Instead of raw GDP figures, we need to focus on GDP per capita. This is currently falling – at least partly because of very high levels of relatively unproductive immigration. Yet this was not an inevitable outcome of leaving the EU, but rather the result of subsequent policy choices.
- Making maximum use of the competencies that have returned to Westminster remains a huge opportunity. Though this need not necessarily rule out dynamic alignment in a few sectors, we need to focus on the domestic policy levers that can be pulled to boost our competitiveness.
- The debate about the future of the UK-EU relationship needs to be cognisant of the changing global environment – which is already very different to 2016. In particular, there has been a major shift in the balance of economic power towards the Indo-Pacific region. This is where the bulk of future economic growth lies, particularly for a service-based economy like the UK.
- The decision to leave the EU had and has mass support. Some 17.4 million people voted for Brexit more than the number of people who voted for Labour and the Conservatives combined in the 2024 election. Historically, Brexit has been as much a left-wing as a right-wing cause.
This is not to say that leaving the EU has had no effect. I stick with the view I outlined before the referendum: there would be an economic shock, not least because you can’t leave something you have been in for over four decades and not expect an impact. Above all, Brexit was a political event aimed at retuning control to Westminster, and in economic and financial terms it would be a process with the benefits accruing over time – as long as it was accompanied by sensible policies. I called this a ‘Nike swoosh’. And despite the failure to implement many of those policies, the potential for such a sustained uptick is still there.