The Economic Implications of Brexit: Perspectives from Diverse Schools of Thought

The economic effects of Brexit have been a central focus of debate for years, with supernumerous econometric analyses and backward-looking forecasts. The majority of economists predict that Brexit will harm the UK's economy and reduce its real per capita income in the long term, while the referendum itself has already caused significant economic turmoil.

Project Fear v. Optimism

There are two predominant schools of thought on Brexit's economic impact. The first, often referred to as Project Fear, comprises hundreds of leading economists and financial institutions. These experts predict various degrees of negative impact, emphasizing the numerous uncertainties and potential long-term economic downturns. Their forecasts are grounded in empirical data and comprehensive analyses, assessing the effects on trade, investment, and overall economic stability.

In contrast, there is the cynically optimistic perspective, often championed by individuals who argue that everything will be fine after Brexit. These individuals may express a belief that the UK will eventually thrive outside the EU, but this optimism is less supported by empirical evidence and more by a wishful view of the future. The reasoning behind this optimism often includes the hope for stronger trade deals and improved regulatory environments.

Uncertainty and Short-term Economic Impact

One of the most significant factors in assessing Brexit's economic impact is the timescale for transition. The transition process will vary for different sectors, making it difficult to provide a clear timeline. In the short term, the economic impact is likely to be negative compared to the period immediately prior to completion. However, it might be positive compared to the EU over the same period. Economists such as Nigel Osborn and Mark Carney echoed the uncertainty in 2016 when they stated, 'We’re all doomed now!'. Their remarks underscores the inherent unpredictability of economic forecasts.

Short-term disruptions include supply chain disruptions, labor market fluctuations, and reduced investment. For instance, strikes and demonstrations have occurred in the UK, limiting people's right to protest. In contrast, France has seen similar labor unrest but has not experienced the same level of governmental restriction on protest rights. These comparisons highlight the varying contexts and challenges faced by different nations.

Long-term Perspectives: Economic Astrology

The long-term economic impact of Brexit remains highly speculative. While economists like Christine Lagarde discuss the future of the EU economy, their predictions are often influenced by external factors such as the automotive industry's downturn, political instability, and labor unrest. Long-term economic scenarios based on these factors are akin to economic astrology. The uncertainty of the EU's economic performance increases the unpredictability of the UK's future.

Future comparisons between the UK's performance in scenarios where it was and was not a member of the EU are likely to be fictional. Both in and out scenarios are difficult to predict accurately, making any long-term economic assessment based on these factors more of a guesswork than a scientifically grounded forecast. The reasoning behind these assessments often aligns with the prejudices of the sponsoring organizations, leading to biased and often misleading reports.

Conclusion: The Pragmatic Argument

Given the current dynamics, the economic uncertainty, and the potential long-term impacts of Brexit, some argue that the UK is better off leaving the EU. This approach minimizes the risk of the EU's economic instability affecting the UK's prosperity. Politicians can no longer blame the EU for the UK's economic challenges, providing a sense of control over the nation's economic destiny.