Brexit will make Britain’s mediocre economic record worse by Simon Tilford
Britain is already an average economic performer by Western European standards. Brexit will further sap its economic dynamism and aggravate startling regional disparities. An observer of Britain’s Brexit campaign would be forgiven for thinking that the country’s economy had been one of the EU’s star performers over the last 15 years or so. Much of the debate focussed on how EU membership was holding back the British economy. Boris Johnson, a leading figure in ‘Vote Leave’ (the official Out campaign), rarely passed up an opportunity to claim that the EU economy was the world’s weak link, and that the UK’s dynamic and flexible economy had little to risk from leaving it. Britain was – explicitly or implicitly – put in the same company as Germany, the Netherlands and the Nordics – reformed, flexible and dynamic. The reality is rather different. And Brexit threatens to make matters worse. The UK’s economic performance relative to the other big EU-15 economies – France, Germany, Italy and Spain – does not stand out as impressive, at least once we adjust for the different prices of goods and services across these countries. UK economic growth between 2000 and 2015 lagged behind Spain and Germany but also France, a country that has become synonymous in Britain with economic weakness. Looking at economic growth per capita further tarnishes the image of the UK as a strong
performer. Germany emerges as by far the best performing big EU-15 economy, with the UK fourth, ahead of only Italy. The British are no richer relative to the EU-15 average than they were 15 years ago. Moreover, the average Briton has to work more hours than the average Frenchman or German to achieve that level of income. Indeed, it is when we turn to productivity that the UK’s status as a strong economic performer is most clearly exposed as wishful thinking. Britain’s GDP per hour worked has fallen to just 90 per cent of the EU-15 average, 25 per cent below French and German levels. Sustainable increases in living standards require economies to combine land, labour, capital and technology in ever more efficient ways; Britain has made a poor job of this, helping to explain why Britons’ wages have risen by much less than their French and German counterparts over the last 15 years. Not only is the UK’s performance mediocre, it is highly skewed by London and its environs. Apart from London, just one British region – the southeast of England – has a GDP per capita in excess of the EU-15 average. And far from catching up with the richer regions of the EU, most poor UK regions have been falling further behind.