Britain is paying the price for its decision to leave the European Union (EU). As we all know, Britain voted to exit the EU in the summer of 2016, and the departure was formalised on 31 December 2020. Since then, Britain has been frustrated with a series of political debacles, prime ministers (David Cameron, Theresa May, Boris Johnson, Elizabeth Truss, Rishi Sunak), new barriers to trade, and declines in investment and movement between Britain and its nearest neighbours in Europe. By one estimate, Britain is 4% poorer today than if it had stayed in the EU.
A few weeks ago, Huw Pill, the Bank of England’s chief economist, said: “What we’re facing now is that reluctance to accept that, yes, we’re all worse off.”
Charts comparing where Britain is to where it might have been.
Source: The Economist
This doesn’t necessarily make Brexit a “mistake” in the sense that many Britons voted to exchange less prosperity for more sovereignty. But most were probably hoodwinked about what the true cost would be. The British were promised that Brexit meant more resources for public and private consumption rather than funding the EU’s poorest members with subsidies. Instead, Brexit has turned out to mean far less resources at home.
As an example, the British health service is now threatened with waves of strikes by nurses and junior doctors. With the country’s finances in a post-pandemic mess, the British government has squeezed the pay of healthcare providers. Between 2010 and 2022, nurses have suffered a 10% real decline in their pay (after adjusting for inflation); junior doctors have lost even more, and many have emigrated with about 14% of UK-trained doctors now working abroad.
Mark Carney, the former governor of the Bank of England, has argued that Britain’s economy was 90% the size of Germany’s before Brexit but only 70% the size of it today. However, critics point out that these figures are distorted by prevailing exchange rates.
While the details are controversial and precise comparisons almost impossible, it is incontrovertible that in economic terms, Brexit has meant that British people must work harder and consume less.
We should remember that Britain is a society of great capabilities, with political stability and the rule of law, a highly educated and skilled population, the most widespread language in the world, and probably the most admired cultural institutions. Perhaps they will work out how to salvage Brexit and make a silk purse out of a sow’s ear.
Source: The Economist
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