Covid has been an easy scapegoat for economic disruption, but Brexit is biting | Anand

It’s two years since the UK left the European Union, slightly more than one since it exited the single market and customs union. Yet, as one prominent Brexit supporter has pointed out, no one seems to have starved to death. A low bar, admittedly, but one takes what one can in these pandemic-ravaged times. However, while we may still have food on the shelves, Brexit has already begun to act as a drag on the UK economy. It seems clear this will persist, though it’s less clear as to what implications this will have for the ongoing Brexit debate.

Think back to the febrile atmosphere of the referendum and its aftermath. There was plenty of loose talk on all sides. Claims such as the £350m on the bus or George Osborne’s warning of the need for an emergency budget in the event of a vote to leave were generally overblown. And remainer rhetoric provided an opening for Brexiters. In response to 2017 warnings about a Brexit “cliff edge”, a spokesperson for the Welsh Conservative leader Andrew RT Davies remarked acidly that “according to project fear we should be holed up in a post-apocalyptic wasteland in threadbare clothes eating tinned food by now”.

Yet Brexit was already beginning to bite. Well before the date of departure, work by John Springford at the Centre for European Reform showed that UK GDP was lagging behind its expected level. By September 2021, he had concluded that UK goods trade was 11.2%, or £8.5bn, lower than it would have been had the UK stayed in the EU’s single market and customs union. Indeed, one reason the much-vaunted “cliff edge” failed to materialise is that we have been slithering down it for a while, and consequently have less far to fall.

And this is starting to hit home. Ian Mulheirn at the Tony Blair Institute for Global Change has made the point that recent tax rises – £29bn of extra taxes are pencilled in to be introduced by the government by 2025 – would not have been necessary had the UK remained in the EU. Brexit is forecast to have a net cost to the public finances of around £30bn a year.

So why aren’t we talking more about this? Well, for a number of reasons, but first and foremost the pandemic. Covid has drowned out everything else and has been an easy scapegoat for all economic disruption. It has also meant that much economic activity that would have been – and will be – affected by Brexit (think of service providers travelling to the EU to sell their wares) has been paused.

So, what is still to come? Trade will become more difficult: it is only in July that the British government will finally institute the remainder of the checks necessitated under the terms of its trade deal with the EU. And over the longer term, the OBR has estimated the aggregate impact on UK GDP to be 4%. Our estimates at the UK in a Changing Europe are slightly higher, at between 5.8% (under a liberal migration policy scenario) and 7% (under a more restrictive regime).

What, then, of claims that Brexit provides us with opportunities to recoup these losses via trade deals and more effective domestic regulation? The former seems hopelessly optimistic, given not only the impact of geography on trade but also the limited nature of the deal so far signed with Australia. While there are indeed possibilities for the UK to regulate more effectively than the EU, particularly in emergent areas of economic activity such as robotics or AI, these gains have yet to be secured, and as things stand it is impossible to see how they could compensate for the scale of the negative impact generated by falling trade with the EU.

Brexit, of course, has shaped far more than our economy. It has also been central to a political realignment that eventually saw Boris Johnson elected at the head of an 80-seat majority, with his leave-voting coalition including large numbers of traditional Labour voters. Yet there have been recent signs that this coalition may not be as robust as it first appeared.

More than half of people now think Brexit has had a negative impact on the supply of food and goods, while 51% think it has adversely affected the cost of living, including more than a third of leave voters. Overall, 57% of Britons think the government is doing a bad job of handling Brexit. Just under half say the same on handling the economy – the worst rating for a government since 2013.

Indeed, for the first time, Johnson is thought to be doing a bad job among leave voters. After he won the “Brexit election” in December 2019, 74% of leave voters said Johnson was doing a good job. As the pandemic hit, in April 2020, that rose to 86%. Now, that number of leave voters who have a positive view of the prime minister has fallen to 36%.

Brexit, then, may not be the electoral catnip it once was. As its effects persist, and particularly as Covid recedes, it is at least conceivable that more and more people come to link the decision to leave the EU with the economic problems confronting them at home. And while, as the Financial Times’ Peter Foster put it, “It’s angina, not a heart attack”, living with angina long term can be an unpleasant experience.

This is far from implying an appetite to reopen the process, still less to think in terms of rejoining. But it does speak to the unpredictability of Brexit’s political effects.