Why we must stop Brexit Part 2: The costs of Brexit

The principal economic benefit claimed for Brexit is that Britain will become free to negotiate trade deals with non-EU countries independently of the EU, and that these will, at least in the medium to longer term, create greater wealth for Britain than we can expect from continued EU membership.  How likely is that?  

There is no evidence to make that supposition seem likely. Progress on trade talks has been minimal, with no indication that deals can be negotiated that could begin to equal the trade we currently do with the EU and through our membership of the EU. Moreover, there is strong evidence that the loss of our right to tariff-free trade with the EU will contribute to some £70 billion p.a. damage to the UK economy. A press release by the National Institute of Economic and Social Research published on 29th October 2019 contains some interesting statements, including the following:

  • We would not expect economic activity to be boosted by the approval of the government’s proposed Brexit deal. We estimate that, in the long run, the economy would be 3½ per cent smaller with the deal compared to continued EU membership.
  • [Under] the government’s new proposed free trade agreement with the European Union … customs and regulatory barriers would hinder goods and services trade with the continent, leaving all regions of the United Kingdom worse off than they would be if the UK stayed in the EU.
  • [Assuming] chronic uncertainty persists, but the terms of EU trade remain unchanged, we forecast economic growth of under 1½ per cent in 2019 and 2020
  • The economy is estimated to be 2½ per cent smaller now than it would otherwise have been as a result of the 2016 Brexit vote.

So, the very threat of Brexit, as well as having devalued the pound, has made the country poorer.  And leaving the EU upon the terms of Johnson’s latest Brexit deal is projected to knock 3.5% off the size of the economy compared to remaining in the EU. 

It is difficult to see how, in a depressed, post-Brexit economy, any government could hope to fulfil £multi-billion election promises. Even with huge borrowing, it will lack the labour of immigrant Europeans, whom the very threat of Brexit has sent dashing back to their home countries. How will post-Brexit politicians save the NHS and the healthcare sectors without European nurses and carers? Where will they find sufficient engineers, labourers and craftsmen for planned capital projects in the construction and housing sectors. Are we to wait for a fanciful boost to the economy from lucrative trade deals, which – if they were to be available – are shown by history to take years to negotiate? We cannot escape all of these difficulties after the damage suffered by the economy since the 2016 referendum, but if we cancel Brexit the economy will be 3.5% healthier and the country up to £70 billion better off, and hopefully a good deal more immigrant-friendly.

* Frank Brierley is a Lib Dem member in Esher and Walton

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17 Comments

  • Everything you say is true but twill make no diffrence to our Brexiteers. I’ll put down the following challenge to a few of them
    Peter what will you say when Nissan pull out of Sunderland?
    Matt what will you say when the NHS is butchered?
    Glen what will you say when your little village is in decline?
    All are likely to happen but on one thing I am sure it won’t be the fault of those that voted for it, it never is.

  • But the damage done by Brexit is nothing compared to the damage that will be done by Corbyn et al if they get into power, with a huge Sterling devaluation and asset price crash, among other wonders. Thus many remainers will vote for Boris to make sure Labour don’t get in unless there is a clear case to support the Libdems in their area. Not much point attacking Boris when the main alternative is going to damage the country more than Brexit.

  • nigel hunter 28th Nov '19 - 12:03pm

    NHS- less economic success,less money for it. Charging nurses doctors to come here,not much chance of that therefore fewer nurses doctors.Medical training school Londonderry SHELVED. Collapse of the NHS engineered by Johnson,s Brexit leave it open to being broken up and USA influences take over..

  • Frankie
    Still “a bit exotic am I” to engage with you. That isn’t going to change, ever.

  • John Marriott 28th Nov '19 - 12:41pm

    Is there going to be a ‘Part 3’ or even a ‘Part 4’? This could go on for a long time. I have to say that I totally agree with ‘frankie’s’ first sentence (not sure about the ‘twill’, though). What more is there to say?

  • In the referendum the usual figure given was that it would cost, long term, 7% of GDP.

    Ultimately the point of having money is to spend it, Brexit voters will mostly think 3.5% – in other words two years of growth is a price worth paying for the benefits of being free of the EU. Many of the 3.9 million who voted LD or Change in the 2019 euro elections would be willing to take a 3.5% hit to stay in the EU.

    Such things are more about identity than economics.

  • @frankie

    How will the NHS be butchered because of Brexit?

    I do not happen to believe whether we remain or stay will have any effect on the NHS whatsoever.
    The only concerns that I have for the NHS is privatisation which could well happen with a Tory Government regardless of whether we stay or leave.
    My moral dilemma is whether I risk voting Tory as I want Brexit and allowing my vote to contribute towards a Government that is then responsible for more privatisation of the NHS.
    I have to make a judgement on whether morally I am able to vote for a Tory to deliver Brexit who will then go on to use my vote in order for them to further privatise the NHS, at the moment my compass is swinging towards they are not going to get my vote.
    But I do not believe that Brexit will damage our NHS for reasons that I have set out many times before. The NHS is far more dependant on dr’s and Nurses from countries around the world outside of the EU, Eu workers make up a very small % of NHS Medical staff.
    Political Parties of all hues need to come up with policies to attract more people to train as DR’s and Nurses. Free University fees for medical staff could be one way to that which remains Free as long as the newly qualified person continues to work for the NHS for say a 10 year period and only has to be paid back on a sliding scale if they decide to leave before the contracted period. We have to do something about the Hundreds of Millions of Pounds we are spending on training Dr’s and Nurses only for them to leave to work in the Pvt sector or abroad.

    I also happen to believe that remaining in the EU poses far worse risk to our economy when the next financial crash comes (Italy) which I keep banging on about I know and so therefore it would be in the UK best interest to be an independent trading nation that is able to adapt to weathering storms and changing markets in a way which is right for the UK rather than a protectionist bloc with an ever shrinking share of the world GDP.

  • Sacha Griffiths 28th Nov '19 - 3:28pm

    In terms of the more narrower public finances Brexit has cost some £50bn of taxpayers money. The cost of the Brexit and International Trade departments, the extra civil servants working on Brexit at the Cabinet Office and pretty much every government department costs £21bn over the last 3 and a half years. The £8bn spent on No-deal contingency measures. The rise in the 10 year Bond yield from the 2.1% before Brexit to 2.7%. An extra £17.5bn in payments over the last 3 and a half years on our existing debt. With a further 2.7% of the total £46.5bn admin cost of the borrowed money used to pay for it all. I am surprised that the Lib Dems have not made more of this and told Leave or Remain voters that we would rather have spent the money on public services. Alternatively, just given you the £3000 each

  • Peter Martin 28th Nov '19 - 4:14pm

    “………..but if we cancel Brexit the economy will be 3.5% healthier”

    You missed out “in the long run”. You managed to include it the first time the 3.5% figure cropped up. Economists are fond of this short phrase. Even Keynes wasn’t quite sure what it means. He famously observed that “in the long run we are all dead!”

  • Matt,

    65,000 NHS staff in England are EU nationals – 5.5% of all staff. Overall, 13.1% of NHS staff say that their nationality is not British. Facts and figures on the nationality of NHS staff for doctors, nurses and other groups, and changes since the Brexit vote.

    https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7783

    now lets see how many staff the NHS are short of

    The NHS is relying on less qualified staff to plug workforce gaps because of a huge shortage of nurses, according to a new report.

    Support staff, such as healthcare assistants and nursing associates, have been used to shore up staffing numbers, said the Health Foundation charity.

    The NHS has relied upon overseas recruitment, but a lack of EU nurses because of Brexit means it is now taking more nurses from countries such as India and the Philippines.

    At present, there are almost 44,000 nursing vacancies across the NHS (12% of the nursing workforce), but this could hit 100,000 in a decade, the report said.

    https://www.theguardian.com/society/2019/nov/28/nursing-shortages-forcing-nhs-england-wales-to-rely-on-less-qualified-staff-report

    So to make up for a shortage of staff, one of the causes of which is Brexit we are raiding the third world for staff and still not filling the gaps. Well done you.

  • @Frankie

    “So to make up for a shortage of staff, one of the causes of which is Brexit we are raiding the third world for staff and still not filling the gaps. Well done you.”

    What a strange choice of words.
    I thought we were a welcoming nation whose values are all about people from less affluent parts of the world and 3rd world countries bettering themselves and their life chances?
    What is so wrong with encouraging more medical staff from the likes of India and the Philippines? or are we only interested in the Eu type of foreigner who is not quite so foreign? That’s not my type of Liberalism Frankie

  • nigel hunter 28th Nov '19 - 7:10pm

    As Liberals we should be welcoming people from all around the World to work in the NHS not picking and choosing. Again to charge people to come here to do that is not really welcoming..Equally to NOT open a training school to allow people from the UK AND the World is not an inducement

  • No Matt the right thing to do is invest in training people who live in the UK. We shoul not ignore them. Poaching people and skills to fill roles we should train people for is not the answer although it is the one we have been taking for decades. Hoever that is not a solution Brexit can give, poor countries don’t invest in much they just scramble for the cheap option.

  • The whole NHS-EU thing misunderstands what the EU is about. The EU aims to level up the poorer countries, not to use their populations as a continuous pool of cheap labour.

    Regardless of what’s happening in the UK and with Brexit, mass recruitment of doctors within the EU is coming to an end, and not just for the UK (Austria also saw a 20% drop last year in the number of Slovaks working there yet Austria is staying in the EU). The wage differentials (particularly considering the cost of living) for doctors are no longer enough to justify building a life and bringing up kids hundreds of miles from their grandparents, relatives, and culture.

    Option number 1 should be for each country to train its own workers to do the jobs available.

    Option number 2, is to try to recruit people on the world market. For example the current situation is that doctors from Ukraine are filling the places left behind by healthcare workers from the poorer EU countries who are working in the west. It doesn’t make much sense to play that particular game of shuffle-along when the doctors could just come to the UK direct from Ukraine – though as I said earlier it’s finishing anyway. However in the coming decade as the baby boomers start to get really old the requirement for medical staff in all the countries of Europe plus the US and Canada is going to go through the roof, so apart from the ethical problems with freeloading off other countries’ education systems, it’s not going to be that easy anyway – as every other country is trying to solve its problems the same way, and many of the middle-income countries these people are meant to come from are going to see a similar process to the eastern part of the EU whereby staying home just starts to be a more attractive option than emigrating for the majority of educated people. So we’re back to option 1.

  • Matt – I believe Leaving will have a HUGE effect on the NHS but not through ‘privatisation’ as such in the short term. IMO Corbyn is a babe in the wood for thinking that; it would be far too toxic even for the very right-wing party the Tories now are. Instead, we will be treated as the gently warmed frogs of the famous don’t-try-this-at-home experiment.

    We already know from the leaked US trade negotiation papers that drug pricing is firmly in the US’s crosshairs exactly as I expected. How did I come to that expectation? Simples! The US is ruled by the lobbyists with the deepest pockets and the drug companies have very deep pockets indeed. So, the higher drug prices and longer patent lives they are asking for will be non-negotiable from a US POV. And from a UK POV, having burnt our boats behind us the government will be in a desperately weak position and politically desperate to have a trade ‘win’.

    We also know from the leaked trade papers that US food companies have offered marketing help to push their dodgy products. I’ll bet the drug companies are equally wiling to ‘help’ with political marketing.

    Then there is the budgetary position the government will be in post-Brexit. Even most hardened Brexiteers expect a substantial hit to the economy which, with the financial promises they’ve made, will send the government’s debt/GDP ratio into the stratosphere.

    At that point a Tory government will panic, campaign promises will be broken and we will get austerity on steroids. And with newly expensive drugs and an economy in trouble many treatments simply aren’t going to be affordable for the public sector.

    ‘Luckily’ (/sarc) a solution will emerge. Insurance companies will come forward to offer ‘top up’ cover for drugs and other services a cash-strapped NHS can no longer afford. And from there it’s a slippery slope with a gradually increasing privately insured sector and a shrinking public one.

    Of course, it won’t happen exactly like that, but we already KNOW from US experience that the public’s health doesn’t matter a fig to the drug companies and medical insurers; they are only interested in money. I can’t help thinking they might be the source of much of the ‘dark money’ funding of the Brexit campaign that Open Democracy has been trying to track down.

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