Without any doubt, the decision of the (slim) majority of the British electorate to leave the EU in June’s referendum will go down in the annals of economic history as one of the most foolish decisions ever taken. A trading nation has decided to give up its privileged position at the heart of the world’s largest and most prosperous trading bloc and go it alone. The UK has not drafted a single trade deal since joining the EEC in the early 1970s and would need to quickly establish accords with its would-be partners from the day after the two year period following the completion of the Article 50 expires. Only at that point could it start to negotiate (not re-negotiate) its trading relationship with the then 27 members of the EU; the nation’s largest current trading partner. The magnitude of this decision is hard to grasp and it is clear that the UK government is still struggling to do so.
In the next few weeks, the Q3 GDP figures will be prepared and will (in the details) give the first significant economic snapshot of how the UK economy stands post vote (but, critically, not post notification of the UK’s intent to leave which is only delivered when Article 50 is invoked). Critical amongst these data will be inward investment into the UK which measures how keen (or otherwise) investors are in staking new ventures and projects within the UK.
The USA and Japan have been blunt in spelling out some of the problems that will face a UK that has given up its trading relationship with the EU. The Japanese openly state that established Japanese firms within the UK may leave the country (taking British jobs and balance of payments with them) if the “Brexit” deal denies them access to the single market – which will surely be the case if the UK seeks to fetter freedom of movement from within the EU. The Americans reiterated the point made prior to the vote that trade deals with the UK would take second place to those with large blocs such as the EU.
In the UK, the PM, Mrs May, has ruled out a points based system to determine immigration to the UK, a key pledge of leave, and refused to pledge an additional £100 million a week to the NHS – Leave intimated that the NHS could enjoy a £350 million per week boost from EU expenditure savings. These two promises were believed to have persuaded a proportion of voters to decide to leave the EU, but are now seen to be hollow. One hopes that sanity will prevail, but “Brexit means Brexit”, doesn’t it?