Why are Brexiteers rubbish at making the economic case for Brexit? On a whole range of things from three pin plugs to driving on the left, the UK is so often the odd man out in Europe. So why shouldn’t Britain be better off making its own laws and regulations, instead of making do, as we have done for the last 50 years, with trying to fit our sprawling messy economic life into a one-size-fits-all framework cooked up in Brussels kitchens over too much midnight oil?
We have heard a lot of talk recently about the Single Market being a British invention, a way of exporting the Thatcher revolution to our nearest neighbours. That much is true. However, as someone who was in Brussels at the time, I saw how quickly disenchantment set in when in sector after sector hallowed practices and vested interests got in the way.
Take the example of Boots, as it then was (before being swallowed up by US giant Walgreens), which once had high hopes of exporting its model of supermarket-style pharmacies to Continental high streets, only to find that in much of Europe dispensing chemists can only be owned by qualified pharmacists, and that wasn’t going to change any time soon. Or high street betting where UK firms like Ladbrokes lobbied enthusiastically for market access only to be stymied by Continental instance that something as dangerous to public morality as betting on horses could only be provided by the state.
Despite the claims by governments of both stripes that the EU would be a boon to the British economy, the Europe-wide convergence of standards on washing machines and hair dryers, led to an admittedly uncompetitive UK domestic manufacturing industry being swept aside by superior German engineering. Meanwhile in sectors where Britain had a competitive advantage, such as retail, long-term savings and high street banking, stifling red tape and monopolistic practices that protect inefficient local incumbents have stubbornly remained the norm. Hopes that utility privatisation would create global British giants on the scale of the French and German electricity and water monoliths have also come to naught. Instead, we now rely on the French to power our homes and empty our bins. The bent banana stories so beloved by Boris were indeed stuff of myths. But the many dispiriting and bruising battles fought and won by British diplomats over issues like whether Cadbury’s could legitimately be sold as chocolate, or VAT charged on food and children’s clothes were real enough.
I know how deeply European anglophiles feel rejected because of Brexit. But rarely have they faced up to the genuine reasons why even enthusiastic British Europhiles fall back on Project Fear rather than trying to make a positive case for British membership of the EU.
On a whole range of fronts that affect the way business is done, the UK has and continues to operate very differently from its Continental neighbours. There are deep structural differences like the fact that England and Wales are common law jurisdictions where courts rely on precedent and common sense. Across the Channel it is Roman Law which prevails, so courts merely apply detailed laws passed down from on high.
Add in the power of French and Italian farming and aerospace lobbies and the fact that Germans export cars and heavy machinery not financial services, it is not so hard to see why the UK might want to forge different alliances with trade partners with whom we are philosophically and structurally more aligned.
The City, like Wall Street, draws its strength from a massive private pension fund industry which channels trillions of pounds of savings to business through the stock market. These are virtually non-existent on the Continent, where banks, often regional co-ops with minimal pressure to make a profit, are the main source of finance. British companies and households also tend to borrow short term on variable rates – a legacy perhaps of Britain’s recent high-inflation past. Continental Europeans save more and borrow less and when they do, it’s at long-term fixed rates which are largely unaffected by the gyrations of wholesale markets. This explains why a monetary union was neuralgic for Britain but largely uncontroversial elsewhere in the EU.
For decades, the UK, supported by Ireland and Sweden, was a force for deregulation and open markets within the EU. Since the global financial crisis, for entirely understandable reasons, the pendulum was already starting to swing the other way. Now, with the UK out the door, on a range of market related issues Franco-German corporatist and dirigiste instincts are reasserting themselves. If that is not going to present a huge opportunity for the City with its pragmatic and market savvy governor Andrew Bailey to rediscover the entrepreneurial verve, I don’t know what is.
Where the former Rothschild banker Emmanuel Macron saw Brexit as a golden opportunity for French finance to steal the City’s crown, reality – so far at least – has failed to live up to his hopes. The latest figures show no more than 5,000 jobs having decamped from London to Paris as opposed to the tens and hundreds of thousands confidently predicted in June 2016. Meanwhile London’s fintech sector goes from strength to strength, far outstripping Paris and Berlin in terms of sums raised so far this year.
The UK has three of the top ten universities in the world, and as the Oxford vaccine has demonstrated, the country is a world-beater in research. Its creative industries deliver massive commercial advantage as well as providing immeasurable soft power. English law remains the framework of choice for commercial agreements the world over.
Brexiteers haven’t done themselves any favours in pretending the UK’s move away from being an offshore entrepot for firms who see the UK as little more than a low-cost bridgehead to the large EU market can happen without pain. For the last 40 years, firms based in the UK have been able to rely on ready supplies of goods, parts and people from the Continent rather than spending money on sourcing them here.
If as a result of Brexit, firms have to think about investing in a more resilient UK supply chain, or investing in British brainpower rather than cheap brawn, a bit of grit in the economic oyster might not be such a bad thing. Nor would it hurt, if it meant that instead of relying on others to solve our economic problems for us, we started to focus more on how we could do that ourselves.
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