A friend recently forwarded me an email from a client who was bemoaning the state of the United Kingdom and questioning whether it still met the standards of a G7 country. In response, I joked that since the population chose to leave the European Union, the country has been in the dismal position his client described, but maybe it cannot get much worse from here. A contrarian might want to buy the pound on the grounds that the mood will improve as things become marginally less disappointing.
In fact, gallows humour aside, it would be a risky bet, because there is ample evidence to suggest that the country will be very challenged unless there are bolder policies. The reasons fall into three broad, interrelated categories, starting with Brexit.
Britain has been paralyzed in many ways both by the decision to leave the EU and by the way it was done. Mainstream politicians and the current government are too scared to admit that Brexit has significantly harmed the economy. Nor will they even discuss the possibility of mimicking membership in the EU’s single market through the alignment of regulatory and trade policies.
As a tactical matter, the current government’s reluctance is vaguely understandable, given current opinion polls and persistent pressure from avid Brexiteers like Nigel Farage. But Labour, too, has remained relatively quiet. Although Labour leader Keir Starmer was one of the most articulate advocates of remaining in the EU, the party seems not to want to re-litigate the issue now that it is already ahead in the polls.
Is this wise? All those cutting-edge analysts who presciently warned that disgruntled voters would be pleased if the UK left the EU are now pointing to signs that some of the same voters regret the decision, or at least the way it was carried out. There is certainly little doubt that Brexit has indeed been bad for the economy. Standard economic indicators – real (inflation-adjusted) GDP growth, investment levels, the size of the labour force – all show that the UK has underperformed relative to its peers in recent years.
Before the 2016 Brexit referendum, I could see why many might have wanted to leave the EU, even if it would almost certainly be an initial negative for the economy. I didn’t believe that the EU was the single most important issue facing the country. I was more worried about the UK’s dreadful productivity performance and staggering regional inequalities. Though I favoured Remain, I was at least open to the idea that leaving the EU would provide the political shock necessary to tackle these problems.
But while four subsequent prime ministers have claimed that they would address the country’s investment and productivity challenges, none has done so, either because they didn’t survive in power long enough or because they were never sincerely committed in the first place.
That brings us to the UK’s second big problem: our investment performance remains dreadful relative to most of our peers, and it is hard to see how productivity will improve in the absence of a major change. The Brexit-induced shock to both trade and the labour supply has made the creation of a new investment program even more urgent.
In 2022, Liz Truss’s short-lived government claimed it would boost productivity through old-fashioned tax cuts, but we know how that turned out. Now, her replacement, Rishi Sunak, has been concentrating on fiscal responsibility while paying little attention to the still-urgent need to boost investment spending. While his government has restored some confidence in financial markets, it has not offered any new hope for the economy. Worse, it could be two years before the next election.
In the UK and across other advanced economies, there is a clear case to be made for much bolder policies to force the private sector to boost investment spending. The case for bolder public investment spending is even stronger. As long as such a program is well articulated, transparent, and endorsed by non-partisan organisations (such as the UK’s Office for Budget Responsibility and the National Infrastructure Commission), financial markets will respond positively.
The third big problem is regional inequality. Here, there is still hope for building a broad-based consensus around bold solutions. Notwithstanding the ongoing factional political battles, the current government seems to recognise that it must get serious about devolving more economic policymaking authority and stimulating investment in the country’s less prosperous areas. Moreover, though Labour largely ignored the problem of inter-regional inequality for many years (ever since the days when I chaired the Cities Growth Commission in 2013-14), the party has finally woken up.
“Leveling up” the UK’s underperforming regions still holds massive promise. As we showed in the David Cameron government’s Northern Powerhouse plan, the UK is well positioned to capitalise on its excellent universities, alternative energies, and other reliable sources of innovation and growth.
The UK economy desperately needs new, forward-looking leadership. The political party that takes the leveling-up challenge most seriously could enjoy a long stint in office.
Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK treasury minister, is a member of the Pan-European Commission on Health and Sustainable Development. Copyright: Project Syndicate, 2022, published here with permission.
54 Comments
was a great slogan in teh 80's but hell its going ot get way way worse -- Despite Covid hurting teh UK -- it also hurt the rest of the world -- teh impact of Brexit is really starting to hit -- and is like a supertanker will take a decade or more to even stop the decline never mind the reverse -- effectively closing or putting up massive barriers to your biggest trading partners, closest trading partners - source of most of your required immigrant labour -- was probably not the wisest move -
Recession is inevitable, inflation is rife worse than here - unemployment is rising -- Perfect storm material
That EU that does €35 billion Pfizer deals via undisclosed text messaging with the hubby and receives suitcaes of cash from Qatar? Why would anyone want to be in that club?
"Suitcases of cash, luxury holidays and secret accounts: Qatar bribery scandal rocks Europe
Unprecedented corruption investigation shakes Brussels’ establishment to the core"
https://www.ft.com/content/e3bfd079-5cc7-4f64-9db6-941ca9d5c3d0
https://moderndiplomacy.eu/2022/10/21/pfizer-ursula-von-der-leyen-and-e…
Brexit is clearly turning out to be the disaster it was foretold to be and 12 years of hopeless misrule by the Tories has left it's mark. I recall there were more than a few long distance supporters of Brexit on this site - they have gone strangely silent as the UK spirals downwards.
The modern Tory party is a proto-libertarian group being pulled ever rightwards by the fear of Farange and his ilk. Lessons for us all in little old NZ.
This might have something to do with it...
Chart 3 really tells a tale.
Would you really have expected there to be a "we'd like the same or more money but more independence please" Brexit?
Voter turnout shouldn't have been more than 10% in favour of it.
But please, go ahead Brockie anytime you want to play the ball not the man knock your socks off.
Are you trying to deny there wants a decent amount of anti-migrant sentiment amoung some of the brexiters? Poms have always loved Poles coming over and stealing their jobs?
This was fairly strongly promoted by Farage at the time and it's fairly widely evidenced.
Your counter is what, exactly?
Why? Because they were in the privileged position of being a member of the worlds largest trading block, that’s why. Not only that, they still had their own currency and monetary policy. Thousands of international firms based themselves in the UK because they had passporting rights to Europe.Now most have moved or opened dual offices. At a personal level, the poms were stuck with me in the other queue at Rome airport arrivals. They have lost European health care, freedom of movement and ability to own property. The reality of Brexit smashed them in the face this summer with 6 hour queues to get a car on a ferry.
England is in terminal decline. Propping themselves up with mass immigration to keep nominal gdp growing to stay in G7 but the reality is life for the average Brit is collapsing as a result. Poor productivity, terrible public and current accounts. Sold off their infrastructure to offshore investors. Lack of energy independence. Paris bourse has overtaken LSE, the evidence is overwhelming.
Thanks Kooti.
You have already demonstrated that you don't have a bloody clue about the United Kingdom, perhaps it would be wiser to leave the commentary to those that actually do.
New Zealand could have some good prospects, but it is hamstrung by its extreme cost of living issues, failing health and education system, skilled workers fleeing and it's current bizzare vision of being a tribal apartheid banana republic instead of a developed first world democracy.
It's quite disturbing how obsessed you are with picking on skilled professionals that choose to not to be exploited by the sad state of affairs in modern New Zealand.
Nobody "brags", or even mentions it, but you continually insist on chiming in, bringing it up and then try to tear people down. Very sad, everything you write has the hallmarks of small man syndrome.
These banal analogies you insert into every single post, do they come from an English for dummies book or do you make them up all on your own?
They have lost European health care, freedom of movement and ability to own property.
Te Kooti Fact check:
Can still purchase and own property (except Austria) ✅
Can still get European Health Care ✅
https://www.homesandgardens.com/advice/can-i-buy-property-in-europe-pos…
https://www.gov.uk/guidance/uk-residents-visiting-the-eueea-and-switzer…
Freedom of movement has been impacted, but you can still visit Schengen area for 90 days. Then visit non-Schengen for another 90 days also. Also still have total freedom of movement with Ireland. ✅
Hi Te Mass Murderer,
It's a 90 day Schengen visa (out of 180), not 99.
Member states of the EU can, have and will be making bilateral arrangements for freedom of movement with the UK for each-others respective citizens. These will just apply to the respective member states instead of being an EU-wide blanket. So no, it's not the same identical rights.
Spelling stuff out requires knowledge and competence. Sadly you lack both.
Not all of the UK hence the bolster of Scottish resentment towards England and Wales. I lived in Scotland during the Brexit vote and after the result, the mood was that of sheer rage around in Edinburgh as Scotland has generous funding from the EU in many areas and predominantly voted to stay.
Yeah, tough times currently for the UKers. Brexit was more about sovereignty more than economics (I thought) but I get that the economics is a worry still. It will take some time to reset things. The pandemic hit them pretty hard as well, so a double whammy if you will. Don't write them off just yet, however. They have an amazing R&D programmes, many associated with their highly ranked university systems. And they don't seem to have any trouble attracting people to their shores still. Whether they're the right sort or not is up for discussion.
it's not all sunshine and roses in the EU either as it has its own set of problems. The Euro currency is an unmitigated disaster that is just waiting to implode and with the ECB having to buy up its members bonds just to try to keep their economies afloat and Germany will not tolerate this situation for ever.
Greece has almost been destroyed as a country and Italy, Spain and Portugal are all languishing economically. Britain has always been badly treated by the EU and so there is no change there. The EU behaves more like the school bully, "join my gang or I will beat you up".
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