Silence over Brexit won't make it go away

Brexit is getting worse, not better. It is strangling the UK’s most important trading relationships. Now we have come through Covid it is getting easier to see that the UK is falling behind similar economies in terms of growth and productivity.

US investment bank Goldman Sachs calculated recently that the UK economy is 5% smaller compared to comparable countries than it was 8 years ago, before the Brexit vote. 

Over time, the damage deepens. Students and scientists don’t meet each other; bands don’t play European festivals; new businesses can’t export to Europe; international businesses are not attracted to the post-Brexit UK. All this is lost future potential - and the lost tax receipts that go along with it damage public services and create a vicious cycle. 

Yet both major political parties don’t want to talk about Brexit and the build up of issues around it. That lack of honesty is poisoning the election campaign, perhaps best summed up by former government Minister Michael Heseltine who last week said that the July 4 general election will be “the most dishonest in modern times”. The leaders of the Conservative and Labour parties owe it to voters to acknowledge that Brexit is a disaster and to explain how they plan to deal with the situation.

Below we look at three areas of mounting Brexit problems for the UK

  • Red tape is not reduced by rebuilding trade barriers with the world’s largest single market - it is massively increased. Trade with the EU is slower and more expensive- Scottish salmon alone has lost £100 million a year in exports. 
  • Businesses are increasingly reluctant to get involved in UK supply chains. That lost growth makes the economic pie smaller - and that means the tax take is smaller too.
  • The UK has less control of immigration not more. It can’t do deals with the EU over returning migrants who come in small boats - and it has lost access to the pool of seasonal workers. 

1 The UK wants to play in the trade equivalent of UEFA - but not by the same rules

The UK is creating mountains of red tape, that it didn’t need before Brexit. Because it doesn’t want to accept the jurisdiction of the European court, the UK has had to leave all the 51 EU agencies, like the European Medicines Agency, which used to be based in London. In FT policy editor Peter Foster’s book “What Went Wrong With Brexit”, published by Canongate, he compares the UK to a country that wants to field a team in the UEFA football tournament - but says it won’t accept any decisions by a UEFA referee. 

The single market operates on the basis that all the 27 countries pool the cost and expertise involved in effective regulation, and accept the decisions of their shared authorities. The UK is having to spend a lot of money to create its own regulatory bodies and they don’t have the same reputation.

This is making it harder for the UK to buy and sell things like medicines and chemicals. The medicines issue is resulting in shortages for citizens with chronic conditions, and the issues for business make the UK less attractive to international business investors who used to see the UK as a good base for operations in the European area.

2 Businesses in the EU are turning away from the UK

Now the UK is classed as a “third country” - not an EU member or associate. That means that trade barriers are likely to deepen over time. The latest example is in defence - the EU is boosting its defence spending but wants to ensure much of the money is spent on EU-based contractors. So the UK’s defence industry is going to struggle to secure orders in the way it would have done if it was still part of the EU. 

Scottish businesses have been open about how Brexit has made it far more difficult for them to trade with Europe. The Scottish salmon industry calculates that it is down £100 million a year in lost exports. (Overall numbers for the UK’s exports are boosted by gold which is traded in London). 

Before Brexit, if a small business wanted to trade with Europe, it was very straightforward. From delis selling Italian wine to consumers in the UK, to a Scottish crofter selling seaweed to German health shops, it was a simple matter of setting up a website and a paypal account. It is very different now and it is getting worse. For three years, the UK suspended its import controls but they are now coming into force and businesses who want to sell to Europe are finding that at trade fairs, they are ignored in favour of people based within the single market. Last week the Great Taste Awards announced they were moving their judging session to Ireland because it was too much trouble to bring speciality food into the UK. 

Services is a particular problem for Scotland which, like the UK, is a service-based economy. It is now hard for a Scot to get a visa to work and to get professional qualifications recognised. Goods and services are increasingly intertwined - this is called ‘servitisation’ - so this is an issue for many manufacturing businesses too. EU countries over time are finding new musicians to play in their orchestras, new consultants to help with their digital transformation, and new companies to buy machinery from - whose technicians won’t need a visa to fix a fault. This situation is getting worse not better. 

3 Immigration is being negatively affected 

The situation with immigration in the UK is being made worse rather than better by Brexit - although that was a key promise of the ‘Leave’ campaign. The UK is not able to get an agreement with the EU over returning migrants now that it is outside the EU, and the number coming in small boats across the channel has gone up.

Scotland, in particular, benefited from a seasonal workforce that would come over from the EU to work in hospitality and agriculture. They would leave at the end of the season and could live in temporary summer-only accommodation. Replacing them with permanent immigrants in areas like the Highlands with a chronic housing shortage creates huge challenges. 

Freedom of movement worked both ways. Young people were free to study and work across Europe. And like many northern Europeans, older people from Scotland and the wider UK were able to spend a few years of their retirement in warmer climates, knowing they had the right to residence and access to local health care. The number of people leaving the UK each year has fallen since the peak in 2016-17, which also affects overall migration statistics. 

The problems of Brexit won’t get better by themselves

Both the UK politicians who are in contention to be the next Prime Minister are letting voters down with their failure to admit the issues of Brexit. These are not going to solve themselves. 

Rishi Sunak is in complete denial about the reality of the situation, while Labour’s Keir Starmer says he will improve relations with the EU - but his red lines make that impossible. Just as you can’t enter a football tournament by saying you will obey some rules but not others, you can’t trade freely within the EU single market without accepting the regulations that apply and the authority of the European Court.

Scotland was forced to leave the EU against its democratic wishes. The UK Government refused any compromise and Labour has indicated it will continue on the same course. Scotland can only reverse Brexit by being an independent country back in the EU.