Ministry of Silly Talk – Brexit reality after ‘huge strides’ claim

Speaking as the Bank of England announced another half-point rise in UK base rates to four per cent last Thursday, Old Lady of Threadneedle Street Governor Andrew Bailey declared: “Over recent years, the UK economy has been hit by a series of significant economic shocks that have affected potential supply. This includes the change in the trading relationship with the European Union, the Covid pandemic, and developments in global energy prices related to Russia’s brutal war on Ukraine and its people. These shocks have held back both productivity and labour supply.”

The detrimental impact of Brexit on productivity and labour supply is not something that Mr Sunak seems at all keen to acknowledge.

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Speaking at the end of last month, around the third anniversary of Brexit, Mr Sunak seemed to be clutching wildly at straws as he talked about the UK having “forged a path as an independent nation with confidence”. It remains unfathomable of course why Brexiters believe the UK was not independent before leaving the EU but, in these days of populism, we should not be surprised by the tub-thumping from the Prime Minister.

We also had the regurgitation from Mr Sunak of the UK “leading Europe’s fastest vaccine rollout”, striking trade deals with more than 70 countries and “taking back control” of its borders.

None of this provides any comfort amid the UK’s post-Brexit economic shambles. Other European countries quickly caught up on vaccine rollout (something which is a long time ago now in any case). The trade deals to which Mr Sunak refers are a mixture of rollover deals replicating what the UK had as part of the EU and new ones that amount to a hill of beans relative to the damage done by Brexit. The effect of the UK losing frictionless trade with its biggest export destination, and world’s largest free trade bloc, is enormous.

And, in the context of the “taking back control” rhetoric, surely the key point here is that the ending of free movement of people between the UK and European Economic Area countries has been utterly detrimental. Does Mr Sunak not know this loss has fuelled the UK’s skills and labour shortage crisis, or does he just prefer not to acknowledge this?

The cost of leaving the EU should be obvious to anyone with an objective view and even a basic grasp of economics, and to many without such specialist knowledge who can see for themselves just where the Tory Brexit circus has led us.

Meanwhile, the ruling Conservatives, even in the face of the welter of evidence to the contrary, generally refuse to acknowledge in any way the huge costs of Brexit and continue to try desperately to paint it as a positive.

Remember the declaration early last year by arch-Brexiter and erstwhile Cabinet member Jacob Rees-Mogg that “the evidence that Brexit has caused trade drops is few and far between”.

He also proclaimed: “I think Brexit has been extremely beneficial for the country.”

It is, obviously, absolutely not clear in what way Brexit could possibly have been “beneficial”.

Of course, people with expertise and many others know the real score on Brexit but there is a danger that some will be hoodwinked.

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The political spin from the Tories around the folly makes it all the more essential that the Bank of England and the likes of the independent Office for Budget Responsibility continue to inform people on the reality of the situation.

Ben Broadbent, Bank of England deputy governor with responsibility for monetary policy, made it crystal clear last week that the effects of Brexit were indeed negative.

He flagged the impact on trade and investment and highlighted the Bank’s belief that the effects of leaving the EU had come through faster than originally envisaged.

Responding to questions at a press conference held after the rise in interest rates was announced, Mr Broadbent said: “Well, Brexit is, as Andrew [Bailey] said in his opening remarks…something that has pulled out potential output in our country and that’s been our assessment for many years, as you know. We’ve not changed our estimate of the long-run effects, but we’ve brought some of them forward. We think probably they’re coming in faster than we first expected, even if the long-run effect is no different.”

He added: “Again, I’m not sure that’s going to help you explain why growth is weaker than the eurozone in 2023, having been stronger in 2022, but over periods of time, yes, it’s having some effect on growth. Although ultimately and cumulatively no bigger an effect than we assessed some years ago. But, you’re right that, based on the numbers for trade and to some degree on the numbers for investment, we think those effects have come through somewhat faster than we initially envisaged.”

The Bank of England also flagged the impact of Brexit in its monetary policy report last week.

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It said: “It is likely that Brexit has been affecting investment for some time. Business investment has been very subdued. This reflects a variety of factors, but some of the stalling after 2016 probably reflects the effects of Brexit, as resources were diverted to Brexit preparations and uncertainty around future trading relationships reduced capital spending. Lower investment affects potential labour productivity through reducing the amount of capital available per worker...

"The effects of Brexit on trade are now estimated to be emerging more quickly than previously assumed, and that lowers productivity somewhat."

Yet supposedly Mr Sunak’s administration thinks it is important to boost productivity. So maybe Brexit is not such a good idea on this front either?

The message from the Bank of England is plain. And it is clearly in contrast to the dizzying spin put on the situation by the ruling Conservatives. Any “huge strides” are surely in a backward direction. Maybe like rewinding some of the gaits in Monty Python’s Ministry of Silly Walks sketch.