Podcast of Rob Lyons' opening remarks from this week's Institute of Ideas Economy Forum
The vote to leave the European Union has left the world’s
economic experts, politicians and economic officials stunned. Voters
were told that leaving the EU would hit the UK economy hard, with the
only question being over what future arrangements might be made with the
EU. If the UK negotiates membership of the European Economic Area, the
so-called ‘Norway option’, then trade would be largely unaffected. But
such a deal would almost certainly require the UK continuing to allow
free movement of EU citizens into the UK, something that is currently
regarded as politically contentious. The alternatives, from a
Swiss-style bespoke arrangement to a situation with no deal at all, with
trade governed by World Trade Organization rules, seem to offer a
sliding scale from ‘very negative’ to ‘disastrous’.
A minority, particularly the Economists for Brexit group, argue that
leaving the EU will allow the UK to trade freely with the rest of the
world and ditch pointless EU regulations, with the prospect of a revival
in economic growth as a result.
But when it comes to future prosperity, is there too much focus on
the UK’s status within Europe? A week after the vote, the government
reported another damning set of current account statistics, confirming
how much more Britain imports than exports. The government finances
still look weak and there is an ongoing and anguished debate about the
poor productivity of the economy. George Osborne’s declared aim of
‘rebalancing’ the economy, both between North and South, and towards
manufacturing, seem to have come to nought. And the economies of the
Eurozone hardly seem in the best of health, either, with the only
question seemingly where the next crisis will hit. Greece? Italy?
Perhaps even France?
So what does the future hold? What kind of deal should the UK aim to
strike with the EU? While we fret about Europe, should we really be
worrying about problems closer to home?