The publication of the Government’s No Deal Impact Assessment this week has predictably set the project fear doom-mongers off again.
In fact, there is little new information in there and what there is highly questionable. Most disturbingly, there is no proper assessment of the economic advantages that come from leaving without a deal. Let’s deal with the bad news first. The document repeats The Treasury’s forecast that no deal will lead to the economy being 6-9% smaller than expected in 15 years’ time. That does not mean we will get poorer, only that we will get richer slightly less quickly – not an ideal outcome, but hardly Domesday either.
Almost certainly, though, the Treasury are being unduly pessimistic. Who can forget their pre-referendum forecast that simply voting to leave would push us into an immediate recession and lead to unemployment going up by 500,000? In fact, the exact opposite has happened: unemployment has gone down to record levels whilst our growth rates are higher than in France, Germany Italy or Spain.
The reason the Treasury got it wrong then and is almost certainly wrong now is that they happily model all the possible costs of Brexit (and of course there may be some) but just ignore the benefits. And benefits there are likely to be, even if we leave without a deal. Perhaps, I should say, especially if we leave without a deal.
Why? For a start, many businesses are currently holding back on investment while they wait to see how Brexit plays out. Leaving as planned on the 29th March may cause some temporary disruption but at last businesses will know where they stand. The UK economy is fundamentally in good shape and the certainty will provide firms with the confidence to invest in the UK once more. All the other options (delaying Brexit, another referendum, Theresa May’s deal) will lead to months, possibly years of divisive debate and uncertainty and is likely to hit business investment even further.
The Treasury also underestimates the boost to the economy we can achieve by breaking free of the EU’s protectionist policies which force up the price of our imports meaning hard-pressed consumers face high prices on things like food and clothing. Even better, leaving with no deal means we won’t hand over billions of pounds to the EU for which we have no liability in international law. That money can be used to help sectors of the economy, such as the car industry and sheep farming, which may be vulnerable to high tariffs imposed by the EU.
And freed from heavy-handed EU regulations aimed at protecting continental producers, our successful small businesses and high-tech innovators and entrepreneurs will start to fly, taking advantage of new opportunities in fast-growing economies around the world.
Most importantly, not having a deal does not mean no trade with the EU. Just this week, the former Australian Prime Minister reminded us that Australia trades successfully with the EU on WTO terms. And of course, no deal on the 29th March does not mean no deal for ever. The EU sells much more to us than we do to them – it is in their interests to make sure trade continues on good terms in the future.
A clean break from the EU may not be without its challenges, but the opportunities it will bring for UK PLC are enormous. The only question is whether our Government and MPs have enough confidence to take advantage of them.
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