So the dust has settled just a little after the Brexit referendum so I thought I would start to explore some of the issues highlighted by the British decision to leave the European Union.
To say that both Britain and the rest of the European Union is in a mess is to somewhat understate things. After the vote the Conservative party dumped one Prime Minister and got the best choice on offer. They had a triumphant party conference where all the Brexiters had a jolly time patting themselves on the back on a job well done. Ministers and the Prime Minister stood up and made grandiose speeches which thrilled and chilled in equal measure and everything looked hunky dory. Then reality came crashing in and ever since there has been one reversal after another for the Government and the Brexiters who have now decided that it is all the fault of we remainers. If only we wouldn’t stop pointing out all the gaping holes in their plans then everything would be just fine. We are Remoaners and we should jolly well shut up – just as the Eurosceptic wing of the Tory party used to be silent for all those years.
On the other side of the channel things are no better. France is in full presidential election mode so we can expect no constructive comments until after these have been concluded. By then Germany will be in Federal election mode so in truth nothing of any real substance will come out of the European Union until the end of 2017 at the earliest. This will leave the European Commision and the European Parliament taking the lead so we can expect a lot of hot air and noise from that direction but little in the way of constructive negotiations. However, as taste of the real problems that the commision is about to face it would seem that the devaluation of the pound has caused a €1.8 billion hole in the current budget of which there is no clear idea how to fill. Now you would have thought that €1.8 billion is a marginal number for something the size of the EU but it would seem that the EU budget is only around €144 billion in total anyway so what will the EU commision do when they lose around 7% of the budget on Britain’s departure? Suddenly all the bellicose noises from the Commision and the European Parliament don’t sound so loud.
The truth is that David Cameron’s arrogance has not only shackled Great Britain with years of complex restructuring of it relationships with the outside world but he has put a large hole into the side of the entire European Union. Nice one Dave.
The first real taste of life outside the EU has been felt in Britain as the pound has fallen in value. Now economists argue as to the benefits or otherwise of this but what is clear is that the British people are starting to see some of the costs of leaving the EU and we haven’t even left yet. Again it is far from clear as to whether the loss in value of the pound is temporary or permanent as values do go up and down but it does underline the fact that the nonsense attacks on the remoaners from the Brexiters are starting to look a little hollow. They were told it wasn’t going to be easy or straightforward and perhaps they are starting release that this might just be the case – hence the trashing around for someone to blame.
Lies, Damn Lies and Statistics
After hearing all the forth and nonsense from the Brexiters I thought I would look for some base information about the relative size of economies and what this might tell us about the likely outcomes of the forth coming negotiations. As with everything the data has to be treated with a certain amount of scepticism but this is what I have found so far:
Size of UK Economy relative to other EU Countries
As can be seen from this data the UK is the second largest economy in the EU by over 1.5% which I have to say I found that rather surprising. I assumed that the UK and France were on a par but this may not be the case. It must be noted that these figures are allegedly for 2016 so it must be assumed that these are estimates. There is also no clear explanation as to how currency fluctuations might affect this data set (they are denominated in US Dollars). Of course the final word of caution must be the source I am using. However it is claimed to be based on International Monetary Fund figures so I have decided to take them at face value.
What this means is that once the UK leaves the EU then there is going to be a big chunk of GDP missing from the EU which equates to roughly the same size as the total GDP from Belgium down. To put things just a little more bluntly Great Britain and Northern Ireland alone is worth more than over 70% of the EU as far as GDP is concerned. This is an awful lot of economic activity to lose and so perhaps some of the more over heated comments coming from the EU look just a little hollow. This is even more the case when you consider that the UK is the largest single net contributor to the EU budget (See above), let alone the financial capital of Europe (some thing I doubt will change anytime soon despite all the so called appeals being made by Frankfurt or Paris). In short it would seem that EU has just as much to lose from a botched set of negotiations especially when you consider the EU average unemployment is around 8.6% and the UK’s is around 5% and the EU growth rate is 1.8% compared to the UK”s 2.2%. (Neither are anything to write home about. Also there is a certain amount of polishing of the EU data as it does include the UK data so without the UK the performance might be worse) What this also probably means is that whilst the Canadian trade deal floundered in Wallonia there is significant self interest by most countries of the EU to ensure what deal is agreed by the negotiators is agreed by the relative legislative bodies.
It is vitally important for Great Britain that we get a sustainable agreement with the European Union. However, it is clear that this is the case for the European Union as well and we can only hope that sensible heads are brought to the negotiations once they have left the rhetoric at the door. The one good thing is that none of this will start until March 2017 at the earliest so perhaps by then we might get some time to take a cool look at the real options. However nothing will start to fall into place until the end of 2017 so we can expect some wonderful peacocking between now and then on both sides of the channel.
I will finish this by reminding everyone of two quotes I have used before:
‘…events dear boy events…’ Harold Mcmillan
‘…Unknown Unknowns…’ Donald Rumsfeld
How about that for a legacy Dave?