I'm increasingly convinced that the best way forward for the UK will be what is portrayed as a hard Brexit, although given its negative connotations I would prefer to call it a clean Brexit. While we can't completely rule out the prospect of staying in the customs union and some access to the single market, the intransigence of the EU authorities and undoubted complexity of the negotiations with 27 countries plus other regional authorities mean a clean and swift break will probably be the best way forward. In any case I would argue joining the European Economic Area which involves continuing to pay into the EU budget and accepting numerous rules and regulations including free movement of labour would be a betrayal of the referendum result. Furthermore if we retained membership of the customs union this would preclude the prospect of securing free trade arrangements with the US, Canada, Australia, New Zealand and many others that have emphasised their keenness to do so and quickly. And remember food prices would fall if we left the customs union.
There is also a reasonable case for some ultra-Brexit whereby we trade not just under WTO rules, but with zero tariffs on all imports into the UK, yielding massive gains to consumers, although personally I would prefer to retain bargaining power in free trade negotiations.
Even hopes for an interim transitional deal involving membership of the EEA will be difficult to secure in negotiations. The EU negotiators are very keen to penalise the UK and see this wrongly as a zero-sum game hoping to take business away from us to themselves. As a result, they want to discuss payment for leaving first, then the main deal, and then any transitional arrangements. Even a deal on existing EU workers in the UK and vice versa will have to wait they say.
And I certainly do not subscribe to all the pessimism we see in much of the media regarding the result and future prospects. So far on the narrow measure of GDP, Brexit has not been a disaster as Remainers suggested it would. I personally said there would be no recession even though the economy was slowing even before the referendum. Indeed in 2016, GDP will have grown by at least 2% (with an upwardly revised Q3 GDP from 0.5% to 0.6% quarter on quarter showing there remains strong momentum) and I believe we will see growth of not far short of 2% next year despite the impact of inflation on real disposable incomes. The idea that consumer confidence would be battered by the vote was never credible. Such an outturn would leave growth higher than all major Eurozone economies, the US and Japan.
But equally important is that the referendum settled once and for all our status with respect to the EU. It has given us back our sovereignty. Already we see this in parliament with the debates about Article 50. In addition it importantly gives us back control of borders. Of course we need to have access to top talent from overseas to sustain our financial services industry and even labour from the Balkans to maintain our fruit picking, but we need to maintain controls to avoid the destabilisation of the society and diminishing of British values. Although we also need to improve British education and labour skills. Finally we need to prevent the awful terrorist activity seen in Germany, France and Belgium and thankfully largely avoided here. This is due partly to our superior security services and somewhat better integration, but also so far to largely avoiding the ridiculous open refugee policies of Merkel.
And I'm also optimistic because we will be able to be a champion of free trade again as happened in the nineteenth century after the abolition of the Corn Laws. There is no doubt that the Anglo-Saxon world is desperate to negotiate trade deals with us. And further down the line once the EU realises its mistakes of protectionism and unneccesary rules of free movement of labour we can secure free trade deals with them too.There is no doubt that the UK is well-placed to take advantage of a post-Brexit world. For example according to the Indigo Index, which seeks to measure a country's entrepreneurial eco-system, and therefore it's potential to adapt and develop, it is ranked fifth out of 152 countries - only behind small countries in Scandinavia as well as Switzerland. This does not mean we should stop still. We need to go further in boosting infrastructure and education, but also cutting taxes and shrinking the public sector.
Anyway I wish you all a merry Christmas and another successful and happy new year!
