False prophecies of an economic collapse have emboldened “no deal” Brexiteers https://t.co/fR9uKDPoU6
— POLITICO Europe (@POLITICOEurope) November 6, 2017
Brussels based Politico.eu published an article on how what it calls ‘the false prophecies of an economic collapse,’ have boosted the confidence of hard Brexiteers. To the point where, as the publication disparagingly notes, some even think a ‘no deal’ might not be a bad thing. It writes:
“Others, including many in British business, are quietly sorry the economy hasn’t taken a hit — if only because to them a hard shock seems the one thing that can sway the politics around Brexit and push the government to strike a favorable trade deal with Europe. If a shock comes, it’ll now probably come ‘too late,’ in the words of one former government insider. The likelier course, economists now believe, is a long-term economic slowdown.“
So, basically, the economists who predicted mayhem are disappointed that it didn’t happen as it obstructs their political ideals, now predict a “slow strangling of the economy” that they seem to find objectionable, because it will not help them stop, or reverse, Brexit. To complicate matters, evidence supporting the pessimistic view that is now Bremain’s best hope isn’t clear-cut. The Bank of England can do no ‘better’ than call Brexit a ‘long-term drag’ that will bring a ‘new, lower speed limit for growth.’ Amit Kara, head of macroeconomic forecasting at the National Institute for Economic and Social Research (NIESR) commented that:
“The short, sharp shock has simply not materialized and unless there is some incredibly destructive news, it’s very unlikely to.“
NIESR projected a slowdown in economic growth over the next five years of an average quarter percentage point annually – which it can only partly blame Brexit for. The UK’s main problem is weak productivity growth. Nevertheless, Politico.eu insists that there is more worrying data, with optimism about business conditions falling for the first time in a year, investment intentions deteriorating and spending plans for building at the lowest since July 2009. Retail sales have slumped and household income is £600 lower than projected if the UK had voted to remain in the EU, according to NIESR.
But there seemingly hangs a strange sense of dread over the article. Nick Macpherson, former head of the Treasury, is quoted as saying:
“Growth will be 1.5 percent rather than 2 percent, that kind of thing. Over 25 years this will have quite a big effect on Britain’s living standards, but day-to-day it won’t be very dramatic. The only thing which could change that is a very hard Brexit indeed. Lorry queues round the M25, planes grounded, that sort of thing. The problem then is it will be too late to do anything about it.“
The tone suggests that the danger is still Brexit. There is not even the slightest appreciation or thinking in the article about alternatives, or new opportunities. Doom and gloom, even though the worst has not materialised, is still, it seems, the first order of the day.
The largest, probably real problem, that is not so much about Brexit, but the way the UK and EU part ways, is the position of the UK’s financial services. Miles Celic, CEO of lobby group TheCityUK worries that
“The U.K. services industry accounts for 80 percent of the British economy, serving customers across the country, the EU and globally. Financial and related professional services are a significant part of that. Regardless of how or when it is done, it is critical for both the U.K. and the EU to agree how this vital trade can continue and to do so as soon as possible.“
Politico.eu cites an anonymous chief economist at one of the major business organisations, that without a transition agreed early 2018, there is ‘a chance’ of recession, and that
“if it happened very suddenly would have a big impact. If there was a fundamental breakdown and there was no transition agreed by the summer or autumn then the financial markets could turn.“
The article ends, characteristically, by briefly talking about the government’s position in the most dismissive way possible. It reproaches ‘Brexiteers’ with “choosing to focus on the half-full glass of Britain’s current economic picture:”
“Buoyed by record employment levels and continued economic growth, Cabinet ministers have in recent weeks begun talking down the problems associated with a ‘WTO Brexit’, the scenario in which Britain falls back onto the standard international trading rules set by the World Trade Organization.“
It quotes an anonymous business leader who says members of the Conservative Party’s hard-line European Research Group are privately lobbying British industry groups, pushing the merits of a ‘no deal’, while at the same time downplaying the threat to the City of London’s dominant position in European finance. One Cabinet minister is said to have asked in private:
“Do you know how many banks have left for Paris? None. It isn’t going to happen.“
A little bit of perspective under a blanket of Brexit-nightmares.