It’s a month since Independence Day. June 23 saw the historic decision by the British people to restore democratic self-government.
It is early days when it comes to judging the impact. But not too early to give a preliminary verdict on some of those who – grandly boasting of their expertise and sense of complete certainty – spoke of how there would be an “immediate” disastrous impact on the economy.
We were told that an “emergency Budget” would be “necessary”. It would include a two pence increase in the basic rate of Income Tax and a three pence increase in the higher rate.
There would also be spending cuts for the NHS, schools and defence and tax increases on alcohol and Inheritance. The budget would take place “within weeks”.
George Osborne, along with his predecessor as Chancellor of the Exchequer Alistair Darling, was emphatic. They wrote: “Any chancellor would have the responsibility of seeking to restore stability to the public finances — and that would mean there would need to be an emergency budget in which taxes would have to rise and spending would have to be cut.”
Osborne also set his civil servants to work. The Treasury produced an “analysis” of “the immediate economic impact of leaving the EU”. It included “higher interest rates on borrowing by businesses and households”. Should we vote to leave the EU the “shock would push our economy into a recession and lead to an increase in unemployment of around 500,000.”
Last week Reed.co.uk, the jobs website, reported that 151,836 new jobs had been added since the referendum – eight per cent more than were added in the same period last year.
One problem we would see straight away, said the Treasury, would be that the “UK would be viewed as a bigger risk to overseas investors.” They would “delay, relocate or cancel investment that otherwise would have come to the UK.”
he Japanese clearly didn’t get the memo. ARM Holdings has agreed to a £24 billion takeover by Japan’s SoftBank, the largest ever investment from Asia into the UK. The number of jobs at the microchip designer’s headquarters in Cambridge will double from 1,600 to around 3,000.
We were told there would a stock market crash. Hmmm. The FTSE 100 closed at 6,338 on June 23rd. It is now over 6,700. Then the gloomsters said it doesn’t count – the FTSE 250 is a better measure – only to find that has bobbed back up too.
The Bank of England dispensed with political neutrality during the referendum to urge us to vote Remain. Now they say there is “no clear evidence” of slowing economic activity.
It is true that the pound has fallen but that adjustment makes exports more competitive and many felt the pound was overvalued anyway.
Before the referendum electronics giant Siemens got stuck into Project Fear writing to its 14,000 British staff about the “significant and negative long-term effects” of Brexit. Now the firm says it is “here to stay”, indeed it expects to make further investment and clarifies: “We never said the UK is in bad shape if it leaves the EU.”
Ernst and Young now predict that we are not heading for recession.
Some estate agents still expect a temporary dip in house prices. But they have also started looking at the opportunities. Many report that international enquiries have increased – scarcely an indication of a country heading for isolationism. Meanwhile the firm eMoov hopes Brexit will mean scrapping the EU box-ticking Energy Performance Certificate, thus saving homeowners £100m a year.
Then there was the big idea of Project Fear – that we would do less trade with the world. For example before the referendum Wolfgang Schäuble, the German Finance Minister said there would be no access to the single market for the UK in the event of Brexit. He now says that allowing such access would be “reasonable”.
George Osborne said we would be “friendless” and President Obama that we would be at the back of the queue.
Yet in the last month there has been huge enthusiasm to sort out bilateral free trade deals – so much easier than the cumbersome arrangements with the EU and its 28 members. Australia, New Zealand, Canada, the United States, South Korea, India, China, Malaysia, Mexico and South Africa are among those who can see the potential for greater prosperity through free trade with the UK.
As the news gradually sinks in that the UK can thrive outside the EU it is not only the British who will notice but the continentals as well.
Referendums on leaving the EU are predicted in Denmark, the Netherlands and Sweden. The Brexit equivalents being, respectively, Dexit, Sexit and Nexit. In April the Dutch used a referendum to vote against a EU/Ukraine treaty – it was felt to be a wider protest than the narrow issue on the ballot paper. Italy’s anti-establishment 5-Star movement has called for a referendum on whether to keep the Euro.
What prospect of Frexit – the departure of France from the EU? At present the polls show the French dislike the EU but they are nervous about leaving. But British success could cause much of the reluctant support for EU membership to vanish entirely.
It is not just Marine Le Pen’s Front National who have become hostile to the EU but many on the Left as well. Even some EU supporters feel that a referendum is needed to resolve the matter – Bruno Le Maire, the Presidential hopeful from the centre right Republican Party has promised to hold one.
During the Cold War there was the Domino Theory. It was that a Communist victory in the Vietnam War would be followed by Laos and Cambodia. Sadly that proved accurate. But Brexit can lead to a much happier application of the theory. Proud European nations can be reborn with their own currencies, deciding their own laws, and independently making their way in the world.