Another view on the issue of Brexit

So there is agreement on Brexit between the EU and the British government It all looks desperately important at the moment, but the details of the deal may not make all that much difference in the long run. It’s economics, not politics, that will ultimately define our relationship with Europe, and the big factors driving the economics are outside the control of negotiators.

For a start, Europe’s importance as a market is shrinking in relative terms as the global economy shifts towards China and India. In the early 2000s, Europe took some 55% of UK exports; today it takes about 44% – a figure likely to fall yet further. Globally, it is trade in services – Britain’s strong point – that is growing, relative to the trade in goods. Most crucial of all, the UK, like America, is ageing more slowly and has a higher fertility rate than most countries of Europe, so its economy is likely to grow more swiftly than theirs. Forecasts suggest we’ll overtake France in economic size by 2030. Demography will shape our destiny far more than Brexit will. (Hamish McRae, The Independent, reproduced in THE WEEK, 24 November 2018).

My oldest son is a banker. Yesterday he told me that his department would remain in London, but that a large, but so far unspecified, number of his colleagues would be moving to France, because the bank has a big presence in the EU and will not be allowed to continue certain activities without doing so physically within the EU. Hamish McRae is a distinguished journalist, but he doesn’t even mention the fact that service companies will be faced with the decision – would it not be advantageous to have a separate operation within the EU, regardless of EU law and regulation. I suspect that we can look forward to significant reduction in the number of service industry jobs in Britain, along with the economic and tax loss that implies. I hope McRea is, in general, correct, but the UK looks as if it is celebrating its “independence” by shooting itself accurately in both feet. Of course, it will be Teresa May, not the mindless clowns on the right wing of the Conservative Party who will be unfairly blamed. The latter should be voted out at the earliest opportunity, which might come soon.

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