Glasgow Social Sciences Hub

By Professor Sir Anton Muscatelli, Principal of the University of Glasgow

2020 has been a year in which we have been tackling the profound economic and social consequences of an unforeseen situation, the scale and scope of which few could have predicted.

Unfortunately, there is now every chance that 2021 will be a year defined by attempts to mitigate the consequences of a phenomenon that is also economically destructive, but entirely unnecessary.

And while even at the darkest moments of the COVID-19 pandemic we have been able to assure ourselves that the situation was temporary, there would be an end point and we would start to work towards economic recovery, the prospect of a No Deal Brexit doesn’t offer such reassurance. The social, cultural and economic consequences will be a fact of life for a long time to come – impacting on almost every aspect of how we live.

The latest figures from the Office for Budget Responsibility (OBR) make for stark reading – suggesting that that GDP will be 1.5 per cent GDP lower in five years than its current central assumption if UK leaves the EU without a deal, with unemployment 1 per cent higher than if we left with a deal. The OBR figures are also very close to the figures that the Scottish Government’s Standing Council on Europe and independent forecasters suggested previously.

To be clear, these are additional to the costs of leaving with a free-trade agreement but sitting outside the single market – and nobody should be in any doubt that even leaving with a deal will come with immense economic costs which will cause real damage. Indeed, the National Institute of Economic and Social Research has suggested that even a ‘Canada-style’ deal proposed by the Prime Minister last year would have seen the UK suffer GDP loss at somewhere between three and four per cent in the long run. The impact could be worse depending on how much these barriers to trade subsequently impact on productivity growth in the UK.

These aren’t just numbers on a page or points on a graph for economists to ponder. These figures represent real businesses who will suffer and close, real people who will lose their jobs and real communities which will suffer the long-lasting effects. As is always the case with economic conditions like this, the brunt will be borne by those who can least afford it. 

The figures are clear – there is no good Brexit.  The best we can hope for is a Brexit which minimises the economic damage as far as possible, and which doesn’t completely cut us off from what is our closest trading partner and should be our closest friend and ally. That we are now in the position of crossing our fingers for a deal which would itself see a substantial fall in GDP and a large rise in unemployment should give us all pause for thought.

A few years ago, I described the prospect of a hard Brexit as the most unhinged example of national self-sabotage in living memory. Nothing has happened since to change that view. It now appears that the self-sabotage is no longer a mere by-product of the Brexit process, but almost an end in itself.

Free-trade agreements, as their name suggests, are designed to manage the interdependence between sovereign nations by lowering potential barriers to trade. They are not usually used to assert sovereignty. The image of a national government, fighting tooth and nail in complex negotiations seemingly determined to make the country poorer and give rise to all manner of disastrous economic and social consequences is a strange sight, and one that few will forget.

Those of us who argued strongly for the UK to remain in the EU during the referendum in 2016 do have to accept that we lost the argument amongst the UK public, and that Brexit will happen.  But there is absolutely no need for it to happen in this illogical, unmandated and deeply destructive manner.

Of course, the argument was not lost in Scotland, with a large majority north of the border voting to Remain in the EU. The Standing Council on Europe which I chair advised the Scottish Government on the range of sensible compromises which were put forward to allow Scotland to maintain some type of relationship with Europe, recognising that Brexit allowed for a range of possible outcomes. This would have allowed for a softer, less economically damaging Brexit. Unfortunately, these offers were not given much in the way of consideration by the UK Government. For instance, Scotland does not appear to be in line for the type of deal Northern Ireland will enjoy.

However, the possibility of a thin trade deal with the EU for the whole of the UK remains on the table for now. This will at least minimise the economic harms as far as possible given the constraints imposed by the UK’s negotiating position, and the government now simply must agree on a deal.  The decisions made over the coming days and weeks won’t just define the next year but could very easily come to define the next few decades for the UK economy.

It is worth recalling that we have done the reverse experiment already: the UK’s entry to the EEC in 1973 was the prelude to a surge in productivity growth as we embraced trade integration. The question is how to engineer the reverse process without doing untold economic damage.

To continue on this unprecedented course and end up with no trade deal at all with our closest trading partners is the ultimate Brexit cliff-edge, and will undoubtedly be judged by historians as the biggest foreign policy debacle, the most devastating economic disaster and the worst social and cultural catastrophe of our lifetimes.

This is a legacy that will live long after the short-term political calculations of the day have been forgotten. Surely it is a legacy no reasonable government should want to follow them into the history books.

This article was first published in The Times on 16 December 2020

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First published: 16 December 2020