Economy is defined as the management of financial matters. The false prophecies of an economic collapse, aired loudly before and in the days after last year’s referendum on European Union membership, have boosted the confidence of hard Brexiteers. A group of them even says a “no deal” with the European Union on future relations after the 2019 exit date isn’t a bad thing.
Others, including many in British business, are quietly sorry the economy hasn’t taken a hit – if only because to them a hard shock seems the one thing that can sway the politics around Brexit and push the government to strike a favourable trade deal with Europe. If a shock comes, it’ll now probably come “too late,” in the words of one former government insider. The likelier course, economists now believe, is a long-term economic slowdown.
With Brexit, “we didn’t drop the frog in a pot of boiling water,” Commerzbank chief United Kingdom economist Peter Dixon said. “It won’t be the big one-off hit that tipped the economy into recession like 2008, but it will be a slow strangling of the economy as activity that might have taken place otherwise does not.”
No Doom Or Gloom
So to most people today, Brexit has been an economic non-event. Growth in the third quarter of 2017 – the three months through September – was up slightly to 0.4 percent, beating expectations, but part of a trend in 2017 of slower growth than the long-term average of around 2 percent a year. Wages were up 2.2 percent – the highest since 2012 – but with inflation at 3 percent real incomes fell.
“Individuals don’t really notice the difference between an economy growing at 2 percent to an economy growing at 1.8 percent,” said a senior economic expert in one of the major business groups opposed to Brexit. “People notice when the economy goes into recession, but we are not in that territory.”
The absence of something closer to apocalypse is making it harder for proponents of a “soft” Brexit with Europe to get heard.
It’s “undeniable that the projections of doom and gloom have not materialised,” said Nicky Morgan, the Conservative chair of the treasury select committee who opposed Brexit, and argued the avoidance of recession doesn’t mean Britain’s out of the woods.
“There are two costs to Brexit,” she said. “There’s the economic cost – and there will be one. Businesses are clearly not investing as much at the moment because of the uncertainty. But there is also the long-term opportunity cost – the cost of lost opportunities. This will be hard for people to feel in their bank accounts. It’s the business which decides to invest but not in the UK That is hard to quantify.”
Morgan warned the government not to let the lack of a crisis allow them to become complacent about the dangers of a mishandled Brexit. “We must not undermine our economy and the last seven years of extremely hard work,” she said.
Morgan and the other Tory soft Brexiteers are in a minority in the party, but have strong allies in government, foremost Chancellor Philip Hammond, who is pushing to maintain as much access to European markets as possible. However, the Brexiteers, led by Boris Johnson, Liam Fox and Michael Gove, hold the power to bring down the government should the prime minister stray too far off their preferred course.