3 years of Brexit: the balance sheet of a debacle Luxury goods group LVMH reports a record year – sales above expectations

Just in time for the third anniversary of leaving the EU, the UK received bulky mail from the International Monetary Fund (IMF). The economic forecast for 2023 is better for the major industrialized countries than feared months ago. Even Germany, which was heavily dependent on Russian gas, is coming off lightly.

Only the British economy will not grow this year, according to the IMF, but will shrink by 0.6 percent. The country is in last place in the IMF ranking published on Tuesday and even worse off than Russia, which is subject to extensive sanctions over its war of aggression against Ukraine.

Chancellor of the Exchequer Jeremy Hunt downplayed the forecast on Sky News. The IMF figures showed that the UK is not immune to the pressures faced by nearly all developed economies. He was referring to long-term projections that Britain would grow faster than Germany and Japan.

Political instability

For the Conservative government, however, the prospects from the IMF are not very flattering. The weak growth is mainly due to a labor shortage, Paul Johnson, director of the Institute for Fiscal Studies, told the BBC on Tuesday. The trigger was, among other things, Brexit, which made immigration from the EU considerably more difficult.

However, leaving the EU also brought other challenges that hinder economic growth. The economy suffers, among other things, from the political instability of recent years. Britain is one of the few major economic areas not yet at pre-corona levels in terms of gross domestic product.

Not a substitute for market access

At 11 p.m. (midnight in Brussels) on 31 January 2020, the United Kingdom had left the European Union, three and a half years after the Brexit referendum. At the end of the same year, participation in the internal market and customs union was over. A hastily negotiated free trade agreement took its place.

It is now becoming increasingly clear that it is no substitute for integration into the European market. The industry complains that the abolition of the free movement of persons has made it more difficult to recruit workers. Staff shortages are everywhere, not least in the National Health Service (NHS), where emergency rooms are in a state of emergency.

Double-digit inflation

At the same time, British companies face bureaucratic formalities when trading with the EU. The “golden age” that the Tory government has called for after Brexit is a long time coming. While the government has made numerous trade deals, they only “copy” existing EU contracts.

Really new are agreements with Australia and New Zealand, to the chagrin of British farmers. They fear cheap competition from the two agricultural countries. Although high inflation eased, it was still in double digits in December. The Bank of England is therefore likely to raise interest rates from 3.5 to 4 percent on Thursday.

Increasing “energy poverty”

This would be another damper on the British economy. And the government’s plans to make the UK a leading location in future technologies to offset the “Brexit dent”. The recent bankruptcy of Britishvolt, which wanted to build a gigafactory for car batteries in northern England, does not fit into this picture at all.

Meanwhile, the “normal” population struggles with its own concerns. With inflation comes more expensive mortgages as a result of interest rate rises and sky-high energy costs. As feared by experts, the “energy poverty” phenomenon has hit the lower middle class. About a quarter of all UK households are affected.

«warm banks» and «food banks»

This means that about seven million households do not have enough money to properly heat their often poorly insulated homes. No wonder warm benches – public areas where you can warm up – and food banks – where you can get free groceries – are experiencing a major rush this winter.

Brexit is not solely to blame for the misery. Short-term Prime Minister Liz Truss’s libertarian hara-kiri economic policies also contributed to this. Nevertheless, the illusions fueled by the exit from the EU are largely pursued. In a recent survey, only nine percent believe Brexit will have a positive effect on the country.

Scorched earth

The Brexit hardliners around former Minister of Economic Affairs Jacob Rees-Mogg are not worried. They finally want to abolish all EU regulations that have been adopted into national law. They can’t explain what benefit this is supposed to have for the economy. Apparently they want to leave the “scorched earth” behind with Brexit.

The so-called Brexiteers make it difficult for Prime Minister Rishi Sunak anyway. Due to his pragmatic nature, they suspect him of being a “leftover” in disguise – even though, unlike Liz Truss, he voted to leave the EU in 2016. Sunak is the fifth Tory prime minister since the vote.

Sunak’s scandals

He’s been in office for 100 days, more than twice as long as Liz Truss. Even critics testify that he and Treasury Secretary Jeremy Hunt have calmed the situation. The first Indian-born head of government in British history is not seen as a strong leader as he is also plagued by scandal.

On Sunday he had to sack Tory general secretary Nadhim Zahawi. The native Iraqi, one of the wealthiest members of parliament, had “forgotten” to impose a million-dollar fine for tax evasion. An investigation into employee bullying against Deputy Prime Minister Dominic Raab is ongoing.

Johnson is already waiting

This damages Rishi Sunak’s reputation, as well as his tough stance on striking public sector workers. Observers postpone him until local elections in May, in which the Tories face a crushing defeat. In the background, previous predecessor Boris Johnson is already working hard with his hooves.

Only half a year ago, the party had practically driven him from the farm. But he still has many supporters who believe only Boris can prevent a debacle in the 2024 election. The opposition Labor party currently has a 23 percentage point lead in Politico’s cross-sectional poll, which would give it a landslide victory

As for Brexit, Labor leader Keir Starmer is also covered for waking a sleeping dog. He rules out a return to the EU or the single market, but his party promises normalization of relations and closer cooperation. Compared to today’s Brexit debacle, that would certainly be progress.