The lesson of how Brexit has damaged the United Kingdom and the push to strengthen the role and policies of the EU
The sovereignists ask for less Europe and greater power for national states. All those who care about a synthesis of sustainable development, liberal democracy and welfare, on the other hand, talk about a more compact, reliable Europe, with a more incisive international role, with the risk of deterioration even for individual European countries otherwise. And Italian businesses? For many years now, the best manufacturing companies have considered Europe as one great single market, full of opportunities, and are well aware of the advantages of exporting to other EU countries as a competitive lever also in relation to other international markets. More Europe and a better Europe is their outlook, consequently.
Confindustria, naturally, continues to insist on the prospects of a less bureaucratic and more effective Europe to reinforce economic relations and competitiveness, especially in the face of the challenges from US and Chinese policy and the economic dangers of the dramatic current geopolitical crises (we discussed this at length in the blogs of recent weeks). It’s consolidating the system of good relations with other business organisations in France and Germany. And it’s asking for a real step change from the European institutions, looking with attention and interest both at the Report on the single market drawn up by Enrico Letta as president of the Delors Centre, on behalf of the EU Commission in Brussels, and at the report on competitiveness that Mario Draghi is working on.
“A non-united Europe is heading towards decline and dependence on foreign powers” maintains the great businessman that is Marco Tronchetti Provera, CEO of Pirelli (la Repubblica, 22 March). And he explains: “Up to now, Europe has not succeeded in pooling all its resources. It has the richest market in the world and 440 million people with the best social protection globally. All of this is based on the values of culture and democracy that underpin the birth of the EU. At the moment, however, there is no project, merely certain faint signals on the common defence and foreign policy front. Whoever wins the European elections has to be able to give a common direction to all this.” In short, “we need a great recovery plan”. It needs to be financed “by acting on the European budget” and also “with instruments such as Eurobonds”, following “the direction already tested with NextGenEU”. In summary, “it is important to guarantee the competitiveness of the financial system. Europe has a lot of private savings to channel into investments and can’t only pay attention to inflation. We have to grow by connecting monetary and industrial policies.”
These are the issues that should be discussed during the election campaign, avoiding a warping of the June vote for the new European Parliament towards national interests in terms of power and devoting too much public debate to mere rabble-rousing, forgetting to deal with economic challenges, facts and figures.
It may be useful, precisely in response to anti-European campaigns, to think about the economic and social, as well as political, effects of a radical choice against the EU: Brexit.
“So far, Brexit has caused the United Kingdom to lose five points of GDP”, claims a study by Goldman Sachs (la Repubblica, 9 February), calculating a difference compared to the great EU countries caused by reduced growth and high inflation linked to the rift between London and the EU after the referendum on 23 June 2016. Bloomberg’s opinion is similar: lower GDP, higher interest on debt, higher unemployment: “The United Kingdom appears unable to escape from the endless damage of Brexit” (la Repubblica, March 21).
An ISPI study by Davide Tentori (12 January) allows us to take a better look at some essential data. Brexit formally became reality from midnight on 31 January 2020, although in practical terms some changes occurred as early as 1 January 2021, at the end of the “Transition Period” of negotiations on the terms of the new economic relationship between the United Kingdom and European Union.
From 2021 to 2023 – ISPI calculates – the country’s GDP grew at an average annual rate of 4.5%, in contrast to an average growth of 3.3% in the European Union. But it must be considered that in 2020 (the year of the Covid pandemic, together with the uncertainty linked to negotiations with the EU to define the Trade and Cooperation Agreement – TCA) “the GDP contracted by 10.3%, much more than the 5.8% recorded on average by the 27 EU countries”. In short, “the British economy has certainly been penalised by unpredictable elements, such as the consequences of the pandemic on international supply chains in terms of logistics and transport – which have caused a shortage of food supplies; but the mistakes made during the brief and no less disastrous experience of Liz Truss’s government also had an impact.”
Contingencies aside, ISPI insists on “a structural loss of competitiveness in the British production system, the result of a twenty-year lack of investment, both in the public and private sector, and a partial loss of the country’s role as a ‘hub’ once outside the European single market.”
The government of Rishi Sunak, who took over from Liz Truss, managed to right the ship, thus avoiding a recession in 2023 (also favoured by a global economy that proved more robust than expected), “but at the price of a fiscal and monetary crunch which will certainly not favour future economic growth.”
Looking at foreign trade, compared to the pre-Brexit and pre-pandemic period, “the United Kingdom managed to increase its trade flows as early as 2022, albeit at the expense of considerable growth in imports which translated into a significant increase in the trade deficit (from 224 billion dollars in 2019 to 288 in 2022). A similar dynamic was recorded in bilateral trade with the EU, falling in 2020 and 2021 and then recovering, exceeding pre-Covid levels in 2022, but in this case too with a growing deficit resulting from growth in imports. The next stress test will be with the introduction of the last instalment of checks on agri-food goods arriving from the EU, starting in spring 2024.”
“Hands free” from EU constraints have allowed London to forge new trade relations especially in the Indo-Pacific area. But so much activism has not compensated for either the growing weakness of the economy, or the loss of London’s central role as a financial centre (many functions, as well as many banking headquarters, have moved to Amsterdam), or the deterioration in living standards.
The recent local elections, with heavy losses for the Tories, reflect this clearly. After 15 years of Conservatives in power, many believe there will be a changing of the guard in the next general election in autumn, with a possible win for Labour.
“An island adrift or with a clear strategy?” asks the ISPI report.
Geopolitical tensions, Washington’s strategies and pressure from China, also economically, don’t favour the role of individual countries, even ones as important as the United Kingdom.
Reflections on the future of Europe, both in terms of industrial policy (with a recovery of competitiveness) and of security, energy and defence still draw London into the arena. And if Brexit isn’t a phenomenon that can be altered in the short term, a new season of more robust relations seems desirable. In a world so full of risks and tensions, no one can engage in “single combat”.
(photo Getty Images)
The sovereignists ask for less Europe and greater power for national states. All those who care about a synthesis of sustainable development, liberal democracy and welfare, on the other hand, talk about a more compact, reliable Europe, with a more incisive international role, with the risk of deterioration even for individual European countries otherwise. And Italian businesses? For many years now, the best manufacturing companies have considered Europe as one great single market, full of opportunities, and are well aware of the advantages of exporting to other EU countries as a competitive lever also in relation to other international markets. More Europe and a better Europe is their outlook, consequently.
Confindustria, naturally, continues to insist on the prospects of a less bureaucratic and more effective Europe to reinforce economic relations and competitiveness, especially in the face of the challenges from US and Chinese policy and the economic dangers of the dramatic current geopolitical crises (we discussed this at length in the blogs of recent weeks). It’s consolidating the system of good relations with other business organisations in France and Germany. And it’s asking for a real step change from the European institutions, looking with attention and interest both at the Report on the single market drawn up by Enrico Letta as president of the Delors Centre, on behalf of the EU Commission in Brussels, and at the report on competitiveness that Mario Draghi is working on.
“A non-united Europe is heading towards decline and dependence on foreign powers” maintains the great businessman that is Marco Tronchetti Provera, CEO of Pirelli (la Repubblica, 22 March). And he explains: “Up to now, Europe has not succeeded in pooling all its resources. It has the richest market in the world and 440 million people with the best social protection globally. All of this is based on the values of culture and democracy that underpin the birth of the EU. At the moment, however, there is no project, merely certain faint signals on the common defence and foreign policy front. Whoever wins the European elections has to be able to give a common direction to all this.” In short, “we need a great recovery plan”. It needs to be financed “by acting on the European budget” and also “with instruments such as Eurobonds”, following “the direction already tested with NextGenEU”. In summary, “it is important to guarantee the competitiveness of the financial system. Europe has a lot of private savings to channel into investments and can’t only pay attention to inflation. We have to grow by connecting monetary and industrial policies.”
These are the issues that should be discussed during the election campaign, avoiding a warping of the June vote for the new European Parliament towards national interests in terms of power and devoting too much public debate to mere rabble-rousing, forgetting to deal with economic challenges, facts and figures.
It may be useful, precisely in response to anti-European campaigns, to think about the economic and social, as well as political, effects of a radical choice against the EU: Brexit.
“So far, Brexit has caused the United Kingdom to lose five points of GDP”, claims a study by Goldman Sachs (la Repubblica, 9 February), calculating a difference compared to the great EU countries caused by reduced growth and high inflation linked to the rift between London and the EU after the referendum on 23 June 2016. Bloomberg’s opinion is similar: lower GDP, higher interest on debt, higher unemployment: “The United Kingdom appears unable to escape from the endless damage of Brexit” (la Repubblica, March 21).
An ISPI study by Davide Tentori (12 January) allows us to take a better look at some essential data. Brexit formally became reality from midnight on 31 January 2020, although in practical terms some changes occurred as early as 1 January 2021, at the end of the “Transition Period” of negotiations on the terms of the new economic relationship between the United Kingdom and European Union.
From 2021 to 2023 – ISPI calculates – the country’s GDP grew at an average annual rate of 4.5%, in contrast to an average growth of 3.3% in the European Union. But it must be considered that in 2020 (the year of the Covid pandemic, together with the uncertainty linked to negotiations with the EU to define the Trade and Cooperation Agreement – TCA) “the GDP contracted by 10.3%, much more than the 5.8% recorded on average by the 27 EU countries”. In short, “the British economy has certainly been penalised by unpredictable elements, such as the consequences of the pandemic on international supply chains in terms of logistics and transport – which have caused a shortage of food supplies; but the mistakes made during the brief and no less disastrous experience of Liz Truss’s government also had an impact.”
Contingencies aside, ISPI insists on “a structural loss of competitiveness in the British production system, the result of a twenty-year lack of investment, both in the public and private sector, and a partial loss of the country’s role as a ‘hub’ once outside the European single market.”
The government of Rishi Sunak, who took over from Liz Truss, managed to right the ship, thus avoiding a recession in 2023 (also favoured by a global economy that proved more robust than expected), “but at the price of a fiscal and monetary crunch which will certainly not favour future economic growth.”
Looking at foreign trade, compared to the pre-Brexit and pre-pandemic period, “the United Kingdom managed to increase its trade flows as early as 2022, albeit at the expense of considerable growth in imports which translated into a significant increase in the trade deficit (from 224 billion dollars in 2019 to 288 in 2022). A similar dynamic was recorded in bilateral trade with the EU, falling in 2020 and 2021 and then recovering, exceeding pre-Covid levels in 2022, but in this case too with a growing deficit resulting from growth in imports. The next stress test will be with the introduction of the last instalment of checks on agri-food goods arriving from the EU, starting in spring 2024.”
“Hands free” from EU constraints have allowed London to forge new trade relations especially in the Indo-Pacific area. But so much activism has not compensated for either the growing weakness of the economy, or the loss of London’s central role as a financial centre (many functions, as well as many banking headquarters, have moved to Amsterdam), or the deterioration in living standards.
The recent local elections, with heavy losses for the Tories, reflect this clearly. After 15 years of Conservatives in power, many believe there will be a changing of the guard in the next general election in autumn, with a possible win for Labour.
“An island adrift or with a clear strategy?” asks the ISPI report.
Geopolitical tensions, Washington’s strategies and pressure from China, also economically, don’t favour the role of individual countries, even ones as important as the United Kingdom.
Reflections on the future of Europe, both in terms of industrial policy (with a recovery of competitiveness) and of security, energy and defence still draw London into the arena. And if Brexit isn’t a phenomenon that can be altered in the short term, a new season of more robust relations seems desirable. In a world so full of risks and tensions, no one can engage in “single combat”.
(photo Getty Images)