The UK economy has performed robustly since the Brexit vote, in complete contrast to the scenarios outlined by HM Treasury in their documents prior to the referendum. The Office for Budget Responsibility is expected to report shortly that the UK economy will grow by some 1.6%. This is slightly lower than the rate expected by the OBR in the spring, but is considerably higher than predicted by the Treasury and almost all outside forecasters before the Brexit vote.
It is true that this year the UK economy may underperform the economies of the Eurozone and the United States but this is understandable after several years near the top of the table and is not likely to continue, provided that we manage our affairs appropriately. Recent good performance by the Eurozone contrasts with its longer term history.
Since the first quarter of 2008, while the UK economy has registered cumulative growth of 10% the Eurozone has managed only 5%. Within this total, the experience of some member countries has been much worse. Over the period, the Italian economy has contracted by 6%. If this comparison were made since the formation of the euro in the first quarter 1999, then we find that whereas the UK has grown by 40% the Eurozone has expanded by only 28% and Italy a feeble 8%.
When the UK decided against joining the euro, it was widely argued that this would be an act of irreparable self-harm as the countries of the Eurozone were set to surge forward on a wave of new prosperity unleashed by the single currency. Gravity models predicted a tripling or doubling of UK trade if we joined. Only a few brave souls stood out against this overwhelming consensus, but not for the first time in our economic history a small band of contrary thinkers won the day.
To read BrexitCentral’s extract of Jacob Rees-Mogg’s speech in full, click here.