SPECTATOR: That Brexit Apocalypse – It Just Isn’t Happening
It has been a month since the UK voted to leave the European Union — but something is missing. Where is the economic collapse? What of EUpocalypse Now? Where is the Brexageddon that we were promised?
To the shock of many — not least business titans who bankrolled the Remain campaign — the instant collapse doesn’t seem to be happening. The UK economy is, for now at least, taking Brexit in its stride.
The oft-predicted job losses? During the three weeks from 23 June, job listings were up 150,000 compared to the same period last year according to Reed Group, a recruitment consultant. ‘That’s an 8 per cent rise,’ says James Reed, its chairman. ‘The vote hasn’t affected things — people are still hiring.’
How about all those international banks quitting the City of London? Last week the US banking thoroughbred Wells Fargo forked out £300 million for a new world headquarters — in London. Since Brexit, the likes of Goldman Sachs and JP Morgan have hailed the City as ‘one of the most attractive places in the world to do business’, citing its ‘stable legal system’ and ‘deep liquid capital markets unmatched anywhere in Europe’.
But surely leaving the EU is so rash it’ll spark financial collapse? While UK stocks took a hit straight after the referendum, the FTSE 100 share index is now 6 per cent higher than before we voted. Even the FTSE 250, comprised of smaller, more UK-centric firms, has almost completed its recovery.
Ah, but the pound has been hammered since Brexit — sterling is about 10 per cent lower against the dollar than a month ago. Bad news for some, but a boost for British goods sold abroad. Especially welcome for a country that borrows in its own currency and runs a big trade deficit. Last summer, the International Monetary Fund warned that a strong pound was hampering UK recovery. Now with sterling lower, our growth prospects have presumably improved.
Not so long ago, the IMF said that Brexit would result in economic chaos. Christine Lagarde, as she campaigned alongside the then-chancellor George Osborne, envisioned scenarios ranging from ‘pretty bad to very, very bad’. That same IMF now takes a ‘benign’ view of Brexit, suggesting growth of 1.7 per cent this year and 1.3 per cent the next — better than Italy, France or Germany.
So, far from Britain shooting itself in the foot, there’s a growing realisation that leaving the EU could be a shot in the arm. Far from shunning us, the likes of Germany and even France are playing nice. Countries as diverse as Australia and South Korea, Mexico and India have made very positive noises about trade deals with the UK. Having put us ‘at the back of the queue’ before we voted, the Obama administration now wants to ‘maximise the economic opportunity’ and strike a deal with Britain ‘as fast as possible’.
Even Osborne, who used the Treasury machine to generate and promote absurdly precise predictions of post-Brexit penury 15 years hence, has changed his tune. Being outside the EU means the UK ‘can reach out to build stronger economic and trading ties with old allies… and new partners’, he said last week. By George, I think he’s got it. Free to strike our own trade agreements, Britain can forge vital bilateral deals with the fast-growing markets of the East, rather than being hamstrung by the commercial sensitivities of 27 other EU members.
To be sure, Brexit has led to uncertainty — and volatility. Some investment is on hold. The property market has slowed, certainly in London (many may hope the cooling continues). So Project Fear has become Project Reassure — with ministers and officials making sensible noises about our economic prospects under Brexit. That has to be a good thing. But it also introduces a new risk: that our EU referendum, and the apparent shock to the system it represents, might be used to justify a return to emergency stimulus measures — whether they’re needed or not.
Should we really slash interest rates to zero just as inflation is picking up? Should we use more quantitative easing, and abandon attempts to balance the books, when market nervousness about too much funny money and excessive debt is already high? Brexit won’t destroy confidence in the UK economy. But an ill-founded policy response to it might.