Brexit supporters are regularly using actual or perceived good news or the absence of bad news to argue that those who warned against Brexit got it all wrong. It means stating the obvious, but there is something you apparently just can’t repeat often enough these days: Brexit has not yet happened. Britain is still in the EU. It should not surprise anyone that the country does not yet feel the ramifications of not being a member.
It’s true that the Remain campaign’s ill-advised “project fear” strategy produced some hyperbolic statements on what would happen during the days and weeks after a Leave vote. But the more measured warnings have become a reality. The pound has plunged and prices have gone up. Foreign and domestic businesses are reconsidering their investment decisions. Financial institutions have started to relocate parts of their staff and operations to prepare for the UK’s loss of the “passporting rights” enabling them to do business across the EU.
But what happened so far was caused by the anticipation of Brexit – not by Brexit itself. The status quo has not changed yet. Unless there is no transition period it won’t change for the foreseeable future. The real challenges only start once it does.
Meanwhile much of the “good news” Brexiteers put forward is anecdotal and ignores the big picture. Every investment decision is suddenly hailed as a vote of confidence for the British economy, even if it was made long before the referendum. Positive economic indicators such as increased exports or employment are celebrated, even if Britain is lagging behind its European neighbours and its own potential.
To be fair, some Remainers are just as anecdotal when they make their case. Not all “bad news” is due to the Leave vote either. And its long-term effects will depend on the UK’s post-Brexit relationship with the EU.
But for the time being even genuinely good news, such as the UK’s GDP growth of 1.5% over the past year, come with a big question mark. Britain may have done well, but it did worse than it could have. Not too long ago, it was among the best-performing economies in the EU and the G7. Now it’s lagging behind. The average growth in the EU28 in 2017 was 2.6% – and in the eurozone it was 2.7%.
In the run up to the referendum, Brexiteers regularly pointed to the eurozone’s economic sclerosis. Now its recovery is one of the factors boosting the British economy.
But the limited positive developments are at risk once Britain actually leaves the EU. Whatever shape Brexit will take, any form of it will involve creating trade barriers and will thus harm the UK’s commercial relations with its continental neighbours. And leaving the EU’s single market and the customs union will also affect British trade with the rest of the world.
Few British exports are genuinely “made in Britain”. Most manufacturers are integrated in pan-European supply chains which rely on frictionless trade within the EU’s single market. After Brexit, raw materials, components and sub-assemblies entering the UK may face duties and customs procedures. This would create additional expenses and delays that drive up costs, hamper just-in-time production and ultimately reduce businesses’ competitiveness on the global market.
British exports will suffer further once the UK no longer benefits from the EU’s numerous free trade agreements. In stark contrast to Brexiteers’ fantasies about a free-trading “global Britain”, businesses will face higher tariffs and other trade barriers in various non-EU markets as well.
The UK government’s problem is that there are no good options. Staying in the single market and customs union will not only be hard to sell to those calling for the hardest of Brexits now. Unless the British are willing to subject themselves to legislation they cannot influence, the UK will have to leave both sooner or later.
The economic ramifications of doing so will be drastic. Brexit minister David Davis has said that Britain won’t plunge into a Mad Max-style apocolypse after leaving the EU. Whatever prompted him to make such an odd comparison, it may have been a good exercise in expectation management. Brexit hasn’t happened yet, but once it does, the absence of disaster may indeed count as success.