In the spring of 2016, the then Chancellor of the Exchequer, backed by the Treasury, said unequivocally that a vote to leave the EU would produce a recession and unemployment would rise by half a million. In fact, employment has risen by 400,000 to the highest rate on record and unemployment is at an all-time low – in stark contrast to the appalling levels of unemployment of the Club Med countries, which are under the yoke of the EU.
Defying the predictions of the British trade associations and of the IMF and the EU itself, UK economic growth in 2016 boosted and in 2017 was 1.8% compared to the predicted levels varying between 1.5% at the top end and as low as 0.6% predicted by a US Bank, which shall remain nameless, lest you would want to switch your funds. At the same time, UK export order books are at a 30-year high according to the CBI and domestic orders at a 20-year high. The current account deficit has been narrowed by two percentage points (although still not enough) and the balance of trade has substantially improved (although still massively in favour of the EU).
The Deutsche Bank Chief Executive recently said that the talk of relocation of staff from London to the EU had been exaggerated and only a few were at risk. The head of the central bank of France said that the so-called threat to the City of London was greatly exaggerated. Direct foreign investment into the UK grew in 2017. In short, the UK economy is strong and in rude good health. Even the strongly-Remain Economist magazine acknowledges that the predictions were wrong.
In the vernacular of Shakespeare, those who contributed to “Project Fear” running up to the referendum and into 2017 were either fools or knaves. They either showed extraordinary bad judgement and poor economic modelling (in which case it calls into question their reliability on forecasting in general) or they were deliberately lying as part of the campaign to keep Britain in the EU (in which case can they be trusted in future?).
The importance of all this is to be clear about the basis of what I am going to say next about the post-Brexit economic future for the UK and the EU, the vision of which is so much tied up in the assumptions made and the politics as played out. One of the problems of much of the erroneous economic modelling was not just that the models are not fit for purpose but, even more, that the assumptions used were erroneous – “garbage in, garbage out!”
To read John Longworth’s piece for BrexitCentral in full, click here.