The cold business reasons why re-joining the EU may become a serious debate
With two candidates with vastly differing economic approaches pitching to lead our country to economic recovery, Mark Whiteley argues that the current economic conditions could see a resurgence in the debate on re-joining the EU.
The UK's political future couldn't be any more uncertain. The Conservative Party leadership contest is ongoing, and features two candidates pitching vastly contrasting approaches to the economy. And even once the next prime minister has been decided by 200,000 party members, he or she will have a maximum of two years in office before they must face the entire nation in a general election. What is more, current polling suggests another change of government could be on the cards.
What is certain, however, is the impact Brexit has had, and continues to have, on the UK business scene. So, amid the deep political uncertainty, could there yet be a serious debate about rejoining the EU? I am not arguing for or against this, but the cold facts about Brexit – and the unprecedented economic challenges leaders are facing – suggest a genuine discussion could be around the corner.
There are countless analyses and studies which outline the economic concerns. The Resolution Foundation concluded last month leaving the EU has "reduced how open and competitive Britain's economy is, which will reduce productivity and wages in the decade ahead". Put simply, that is to say the UK will be poorer. The Office for Budget Responsibility, meanwhile, has said the UK and EU's post-Brexit trade agreement will reduce long-term productivity by 4 per cent compared to if it was in the EU. The Financial Times has reported this equates to £40bn a year in lost revenues for the Treasury.
The debate is even more pronounced when comparing the UK's economic performance to the EU's. Recent Organisation for Economic Co-operation and Development research, cited in the New Statesman, shows the UK's GDP per capita growth since the 2016 referendum is at 4 per cent… behind the EU's at 9 per cent.
This is further reflected by the anecdotal difficulties of doing business on the ground in the EU post-Brexit. For my company, a trade credit insurance broker, acting for a firm in France, for example, couldn't have been any more straightforward pre-Brexit. Now, as a UK broker regulated by the Financial Conduct Authority, we have to be registered in an EU country, meaning we have to be knowledgeable about the local regulator and its expectations of us. By all means, it's doable – but it also takes time. And, in any business, greater inefficiencies mean greater costs. This is an issue across the whole of the service sector.
Some 18 months after the Brexit "transition period" ended and the UK lost access to the customs union and single market – hailed as an "amazing moment" by Boris Johnson – it feels like the companies we work with are still going through their own transition periods, with no end in sight. All these clients – whether they erect steel, manufacture timber or provide advertising services – offer credit terms to their customers and while they can tolerate the current difficulties, it's clear they are not yet reaping the benefits and "certainty" promised by the prime minister.
The UK was trying to stand on its own two feet following its departure from the EU, which was an unprecedented event. Unfortunately, that was followed by a quick succession of further unprecedented events – a global pandemic, Europe's biggest conflict since the Second World War and 40-year high inflation rates – and the spiralling costs that came with those, not just in terms of finance but also emotional energy. Is the next government going to be able to prioritise delivering a proper Brexit when there is so much disruption to deal with?
Ever since the referendum, the debate surrounding re-joining the EU has been on the fringes. It's a conversation that takes place among activists, not the general public. But how long will this remain the case? The longer this turmoil goes on, and the longer UK businesses toil through a struggling economy, more people are going to be worse off. This economic reality, combined with more political uncertainty, means the debate about EU membership could soon be about to get serious.
