Before the Brexit vote, the majority of economists forecast economic doom for Britain outside the EU. But the economy has, so far, been doing significantly better than expected. Will Britain continue to thrive? Or will the anticipated economic consequences of leaving the EU catch up on us? And how will Theresa May’s new government help to shape the future of our economy?
On 14 September 2016, The Spectator held a discussion at the British Museum on the economic prospects of the UK, attended by over 300 guests. The panel, chaired by Andrew Neil, addressed the question: how does the new political landscape affect the UK economy?
Anatole Kaletsky, economist, author, columnist and founder of Gavakel, kicked off the discussion with a gloomy view of our future, calling Brexit ‘maybe the biggest shakeup since WWII.’ He admitted that he and other experts had been wrong about the immediate effects of the vote, but warned that investment and jobs would be cut, and that leading financial and business services would suffer. There were loud jeers from the back seats when he suggested that the UK would no longer be the financial capital of Europe. Kaletsky was certain that Britain would lose access to the single market by prioritising immigration, and that it was unrealistic to expect blossoming exports and trade with countries like Australia. He concluded that Brexit would be so damaging to domestic politics that a second referendum was ‘quite likely’ – producing uproar from the crowd. When challenged by Andrew Neil on his morose outlook given the current economic state of the country, he insisted that the economy will show signs of slowing down in the third quarter.
Liam Halligan, economic commentator for The Sunday Telegraph, and former economics correspondent at Channel 4 News, dismissed predictions of economic doom, saying that forecasters have been made to look ‘quite silly.’ He saw many positive consequences of the vote to leave the EU, including less regulation, controlled immigration and increased trade with the rest of the world. He hoped that Brexit would force Theresa May’s new government to remember the forgotten voters, address housing shortages and abandon the HS2 rail link. Halligan ended with a warning about the effects of too much quantitative easing. When challenged by Andrew Neil on the uncertainty of future trade deals, he responded that ‘trade deals don’t really drive trade [… ]What drives trade is entrepreneurs’ to loud applause from the audience.
Chris Darbyshire, chief investment officer at Seven Investment Management, admitted that we can never be sure of the economic effects of Brexit. In the short term, he saw banks, corporate borrowers and exporters as winners, but concluded that the average citizen would be slightly worse off, as holidays and goods from abroad will become more expensive. He estimated that inflation would reach 3 per cent by the end of next year, much higher than the Monetary Policy Committee’s predictions. Darbyshire hoped that the government would be able to finance additional expenditure to benefit consumers, but feared that Theresa May’s attitude to Britain’s trading future is not what the public voted for, as he sees the Brexit vote as a rejection of free trade and globalisation.
Claer Barrett, personal finance editor of the Financial Times, examined the economy from the perspective of FT readers, about a third of which she suspects voted for Brexit. She thought that the UK would be damaged by a reduction to immigration, and envisaged problems sourcing workers to address the housing shortage. Barrett also said that quantitative easing will negatively affect people who are not asset-rich, and pensioners looking to buy an annuity.
The discussion was followed by a lively Q and A, with audience members keen to challenge the experts on their predictions.
Thank you to Seven Investment Management for sponsoring the event. You can listen to the discussion using the player below:
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