Why I continue to write about Brexit nearly a decade on

Before getting to what Prime Minister Sir Keir Starmer had to say about putting “Britain at the heart of Europe”, I would like to take a step back to explain something.

Sometimes I am asked, on occasion politely and sometimes not, about why I continue to write about Brexit.

There is no doubt this query oftentimes comes from the politically motivated and we should not underestimate the degree to which some people - die-hard Brexiters and more moderate people who clearly do not appreciate the issue being raised - would like silence on it.

I have even had discussions with people where I mention the economic damage of Brexit and they immediately start diatribes about the Scottish Government, in what on occasion amounts to breathtaking deflection.

Yes, the SNP has stuck steadfastly with its view that European Union membership is a good thing.

However, it is surely difficult to argue this is not an entirely rational stance - just look at the economic damage caused by Brexit.

It is also worth observing the Scottish Liberal Democrats, on the other side of the constitutional divide from the SNP, also highlighted the grim effects of Brexit in their manifesto for the Holyrood election.

They declared: “The botched Brexit deal - pushed by Nigel Farage and delivered by the Conservatives - is making us all worse off and Labour don’t have a plan.”

The crux of the matter, leaving the politics out of things, is there is a huge body of research and expert opinion highlighting colossal damage to the UK economy from Brexit.

Yes, the Brexit vote might have been 10 years ago next month, the UK’s technical departure from the EU in January 2020 and the country’s hard exit from the single market nearly five-and-a-half years ago.

However, it is crucial that people realise the damage is ongoing.

No one should be in any doubt the UK economy has been suffering a protracted malaise.

And that makes the refusal to mitigate the Brexit damage in a serious way even more frustrating.

Of course, there would be hurdles to returning to full EU membership. However, these are probably not insurmountable.

And, in the meantime, it would be possible for the UK Government to move towards European single market membership. It is worth noting that rejoining the single market would not go against the 2016 referendum result. The Leavers would still have their Brexit.

If rejoining the single market could be achieved, it would mitigate in a huge way future damage from Brexit.

In this regard, we should remember that the Leavers had their Brexit on January 31, 2020, and their celebration party in Parliament Square.

However, the real damage began when former Conservative prime minister Boris Johnson took the UK out of the European single market with his hard Brexit at the end of 2020.

We should also remember the 2016 referendum never asked what kind of Brexit people wanted. It was assumed by those calling the shots that voters somehow wanted the hardest, and most damaging, Brexit. Goodness knows quite how that conclusion was arrived at, although it may have been the ideology of those in charge and the populism that for so long kept their bubble from bursting.

As we look at the UK now - from a purely economic perspective and putting aside whatever political impediments might be perceived by a Labour government seemingly terrified of telling the Brexiters they were wrong and upsetting those “red-wall” voters - rejoining the single market would be an enormous boost.

Such a move – bringing with it the return of free movement of people and frictionless trade between the UK and European Economic Area - would provide a step-change in the UK’s fortunes.  

And it is the only economic policy that could deliver such a huge boost, in short order, to output and living standards.

This is clearly an issue for now and the future - not a past one like the Brexiters would try to have people believe.

The Labour government’s efforts seem to be focused on tinkering about with policies to eke out a tiny bit of growth here or there.

And the cold numbers tell the simple truth.

Labour has made a huge song and dance about the UK’s India free trade deal signed last year.

Yet the UK Government estimates that annual UK gross domestic product will by 2040 be 0.13% higher than it would have been without the India trade deal.

A working paper on the impact of Brexit published last November by the National Bureau of Economic Research (NBER), which is based in the US at Cambridge in Massachusetts, puts the spotlight on the scale of the damage to the UK economy from this folly.

The authors of the working paper are Nicholas Bloom of Stanford University, Philip Bunn of the Bank of England, Paul Mizen of King’s College London, Pawel Smietanka of the Deutsche Bundesbank, and Gregory Thwaites of the University of Nottingham.

The NBER is a “private, non-profit, non-partisan organisation”.

The abstract for the working paper, The Economic Impact of Brexit, states: “This paper examines the impact of the UK's decision to leave the European Union (Brexit) in 2016. Using almost a decade of data since the referendum, we combine simulations based on macro data with estimates derived from micro data collected through our Decision Maker Panel survey. These estimates suggest that by 2025, Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time.”

Chancellor Rachel Reeves flagged this research in her Mais lecture in March.

The working paper abstract continues: “We estimate that investment was reduced by between 12% and 18%, employment by 3% to 4% and productivity by 3% to 4%. These large negative impacts reflect a combination of elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process.”

Richard Hughes, who was at the time chairman of the Office for Budget Responsibility, said in spring 2023 of Brexit’s effect: “We think that in the long run it reduces our overall output by around 4% compared with had we remained in the EU.”

For the avoidance of doubt, even the 4% figure is more than 30 times the magnitude of the estimated 0.13% India trade deal impact. The NBER working paper range for the estimate of Brexit damage of 6% to 8% equates to between about 46.2 and 61.5 times the magnitude of the India trade deal benefit.

This comparison hopefully highlights beyond doubt why we should all be focused on mitigating the enormous impact of Brexit.

And, given all this and the apparent discontent over living standards which looks to have fuelled Reform, we should perhaps not be surprised the prime minister is talking about Europe.

Sir Keir declared on Monday: “The last government was defined by breaking our relationship with Europe. This Labour government will be defined by rebuilding our relationship with Europe, by putting Britain at the heart of Europe, so that we are stronger on the economy, stronger on trade, stronger on defence.”

Asked if this meant he might abandon Labour’s manifesto red lines ruling out taking the UK back into the EU, European single market, or even the customs union, the prime minister did not give a direct answer.

He did say: “I strongly believe we've got to turn our back on the arguments of the past, not open old grievances, but look forward together to how we make this country stronger, how we make this country fairer - and so that's the approach that I will take.”

The fact of the matter is that Labour cannot seize the step-change opportunity for the UK economy if its red lines remain – with rejoining the single market absolutely crucial and regaining EU membership most desirable.