Like Banquo’s ghost, there is one presence that hangs menacingly over all the Office for Budget Responsibility’s latest dismal set of growth forecasts for the UK economy – an uninvited guest at the table, as it were. Yes, Brexit.
It’s the ghost that nobody – other than Sir Ed Davey, the Lib Dem leader – wants to talk about.
There are only two references to it in the OBR’s entire 197-page “economic and fiscal outlook” to accompany last week’s Budget – and these were only passing in nature.
It’s true that Rachel Reeves, the Chancellor, has referred to Brexit on a number of occasions by way of excuse for the fiscal and economic mess she’s in – but even she has not made much of an issue of it, so terrified is Labour of upsetting Leave-voting constituents.
Some of these voters may by now be suffering from buyers’ remorse but most do not want to be told Brexit was a mistake. In any case, for many of them, it was never about the economy – rather, it was about sovereignty, immigration and taking back control.
Understandably, the Government is reluctant to reopen old divisions and wounds, and beyond the largely meaningless ambition of a “reset” in relations with European neighbours would much rather forget the whole thing.
But that doesn’t stop others from raking over old ground. The great bulk of this analysis tends to conclude that, from an economic perspective at least, Brexit has so far proved close to disastrous.
The latest such assessment comes in the form of a paper from the US-based National Bureau of Economic Research (NBER). This concludes that Brexit has reduced UK GDP by 6pc to 8pc, far more than most previous estimates.
Investment is worse off by between 12pc and 18pc, employment by between 3pc and 4pc, and productivity also by between 3pc and 4pc. There have been few more devastating assessments than this.
Of course, you can take all such estimates with a large pinch of salt if you want. It’s always impossible to prove the counterfactual, or what would have happened had things gone the other way.
Brexit supporters
Brexit has so far proved a major disappointment Credit: Henry Nicholls/Reuters
What’s more, Covid and the subsequent energy price shock have considerably clouded the picture. It’s hard to disentangle Brexit-related effects from other negative shocks.
Besides, virtually all economic analysis of Brexit tends to reflect the prejudices of those involved in putting it together. All five of those who have put their names to the NBER paper are highly respected economists but there doesn’t appear to be a Brexit-supporting voice among them.
Finally, there is something faintly incredible about the numbers. In real terms, the UK economy ended last year some 7.6pc larger than it was at the beginning of 2016, the year of the Brexit referendum.
This is obviously a disappointing level of growth, but is actually marginally better than both Germany and Italy – though it lags France and separate numbers on GDP per head look much less favourable.
Even so, it stretches credulity to think that the UK would have outperformed all these economies by the margin implied by the NBER had Britain stayed in the EU rather than left it.
Be that as it may, the underlying substance of the NBER’s analysis is undeniable and – unlike most previous assessments – it carries more weight by drilling down at a micro level into what businesses say are the real world consequences.
The damage to trade intensity is the least of it, the writers conclude. Instead, the report highlights elevated uncertainty, reduced demand, diverted management time and increased misallocation of resources from the protracted nature of the Brexit process.
This very much tallies with my own fears at the time of the referendum that the process would prove long, divisive and all-absorbing, depriving the political and business class of the energy needed for almost anything else. So it proved.
One might argue that these distractions are now largely behind us, allowing companies to focus on opportunities rather than obstructions. But if so, it doesn’t seem to have improved the outlook much. Nobody anticipates rip-roaring growth.
In defence of Brexit, it might also be argued that many of its economic opportunities have so far been squandered.
This could change. Now that the country no longer has to comply with European law, the opportunity for growth-friendly divergence might easily be resurrected under a different government. Already we see one potential economic benefit around less onerous artificial intelligence regulation.
Yet to slightly misquote John Maynard Keynes, the British economist, we set ourselves too easy and useless a task if all we can say in tempestuous times is that eventually the storm will pass and the sea will be flat again.
Even Brexit’s most enthusiastic cheerleaders – including the leading lights of Reform – would concede that on almost every front, Brexit has so far proved a major disappointment. Sad to say, this was always inevitable given the nature of the beast.
Nigel Farage
Nigel Farage was among Brexit’s most enthusiastic cheerleaders Credit: Luke Dray/Getty Images
Getting Brexit over the line required an unholy alliance of different groups and interests with often strongly divergent views on what they wished to achieve.
Small state, low tax, free trade libertarians do not make natural bedfellows for anti-immigrant, nationalistic protectionists, yet this was the coalition required to give Brexit its majority.
In the event, Brexit has failed to enable either of these two conflicting visions. Instead, we’ve ended up with the worst of both worlds.
Substantially higher public spending and taxes go hand in hand with a regulatory burden that almost unbelievably makes business leaders long for the comparative freedoms once enjoyed within the European Union.
If Brexit was meant to tame immigration, in practice it has done the very reverse. Nobody voted for the Boriswave – yet this is what freedom to set our own border controls delivered.
Still, at least we’ve been able to negotiate our own trade deals. That must be worth something, mustn’t it? Sadly, the impact is judged by the OBR to be too insignificant to qualify as a meaningful positive for medium term economic growth.
Lest it be thought the OBR is being deliberately unhelpful, its judgement is based on the Government’s own internal assessment of the benefits, which economists consider to be at best marginal.
If Brexit was supposed to be a moment of national economic renewal, it has comprehensively failed to deliver as it was supposed to.
Maybe the OBR is being too pessimistic in downgrading its medium term forecast for productivity growth to just 1pc a year – but even with the wonders of AI, I wouldn’t bank on it.
Despite the downgrade, it is at the top end of most outside assessments and may therefore prove too optimistic.
Ironically, the one thing Brexit has delivered is an old-school Labour Government intent in its high-tax, high-spend ambitions on making us more like Europe, not less so. Plus ça change, plus c’est la même chose.
