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Brexit: The Tories‘ Battle Against the Economic Facts

Why Germans and other nations should involve themselves more in the UK debate.

August 7, 2017

Why Germans and other nations should involve themselves more in the UK debate.

When he was an opposition MP, David Davis, now the minister in charge of Brexit, said: “A democracy that cannot change its mind ceases to be a democracy.”

And yet, very few of the facts and rational, economy-based arguments make it into the current British political discourse. Instead, there is an almost Trotskyist fervor among the partisans of Brexit in Parliament and in the conservative media.

The overriding goal is that anger against the European Union must be sustained and that the decision of the referendum can never be questioned. The fact that only 37% of registered voters supported Brexit is deliberately overlooked.

In an almost Erdoganesque manner, a crude majoritarianism reigns. The proud traditions of British democracy – including the primacy of parliament and a close observation of the principles of fairness – are turned into mincemeat.

Never mind that in many countries including Italy, Denmark, Ireland, Sweden, Hungary and Switzerland set a threshold of 40% or even 50% or a double majority of voters and cantons before a referendum result is valid.

Remember as well that the Brexit referendum was advisory, not legally binding. Margaret Thatcher called referendums “a device of demagogues and dictators.”

Making up rules as we go along

Of course, Britain has no written constitution. Thus, rules can be made up as we go along. But that cuts both ways, also with regard to unmaking what some now believe is binding.

As Sadiq Khan, the London Mayor and a force to be reckoned with inside the Labour Party, has suggested, there is a good case for a second referendum, perhaps early in 2019 (or whenever the EU departure agreement is agreed with Brussels).

As far as Tory MPs are concerned, they are not really thinking ahead at this stage. But while they don’t want to think of any general election before 2022, a second referendum is possible.

Ireland and Denmark voted more than once on EU Treaties. In any democracy, especially one as old and as proud as ours, it seems reasonable to hold a final test of the people’s will before any truly drastic move.

Surely, embarking on the amputation of Britain from Europe – a move that will overwhelm other political, economic and social decisions into the 2030s – qualifies for such reconsideration by the people.

Considerations about democracy aside, there are also those pesky economic facts of life. Once again, we Britons — and especially the Conservatives — generally pride ourselves that we put economic facts over political ideology. If only it were so.

A growing Europe

For the past decade, the British have looked with contempt at a Eurozone which seemed unable to grow and featured mass unemployment, especially in the southern Mediterranean countries.

The Brits patted themselves on the back at the decision to stay with the pound sterling, while those poor, ignorant Europeans found themselves nailed on the cross of their single currency.

Now, the story is different. The EU looks like a growth center. Spain has posted 3% GDP growth each year for the past three years. President Macron has pushed back anti-European forces in France and seems determined to bring in labor market reform which could unleash French growth.

And our eternal favorite overlord, the United States, isn’t singing the right gospel any longer either. Donald Trump’s protectionism runs counter to two centuries of British free trade philosophy.

And the trend toward ever more inequality and low-paying jobs isn’t more pronounced in the United States than anywhere else.

Forget currencies

To be sure, the EU has problems – including dealing with masses of refugees from the destruction of the state in Iraq, Libya and Syria — after military interventions initiated by the United States, United Kingdom and France (under Sarkozy).

But British Conservatives – who see a strong U.S. dollar as validation of U.S. strength and a weak euro as a foregone conclusion for a continent on the ropes – now have to recalibrate their economic belief system.

The euro has strengthened considerably this year, in a direct reflection of the helter-skelter, completely inconsistent and unrealistic policy path pursued by Donald Trump.

With regard to our own currency, UK conservatives, in strange contrast to their traditional views on the euro, have always heralded a weak pound as a sign of our great “flexibility.”

They are silent on the prospects of the weakening British economy, which now heads south after the initial bump from a devaluing pound has worn off.

According to the UK Office of National Statistics, growth is slowing down to just 0.2% in the first three months of 2017 and an estimated 0.3% for the second quarter.

Bye-bye City

Meanwhile, private and public debt soars. And City firms, long the engine of accumulating wealth for the United Kingdom’s upper crust, have started re-locating to Frankfurt, Dublin and Paris.

Even Lloyds of London has moved 10% of its staff and operations to Luxembourg to stay within the EU.

Japan’s biggest bank, Mitsubishi UFG is moving to Amsterdam as Mrs May’s stubborn rejection of any compromise on Brexit means firms have to assume Britain will soon be amputated from the Single Market.

As regards our nation’s future path, it is perfectly possible to leave the EU Treaty and no longer elect MEPs or send a Commissioner to Brussels. And yet, as we drift to a path like Norway and Liechtenstein (via a future European Economic Area or EFTA relationship), this will be sad loss of influence.

Britain the rule-taker

Most poignantly, Britain becomes a rule-taker not a rule-maker. That is the net effect of a strategy that aims for a political but not an economic Brexit.

Even on that road, to avoid a full rupture and allow space for new political voices to emerge, the United Kingdom will need help from its German friends, especially important economic actors.

They should be much clearer about what the loss of the United Kingdom means for Europe.

German business naturally does not want to be seen as interfering in a British political process. But politeness at times can be unhelpful.

It is time for clear statements from all of Britain’s friends in Europe that the damage of Brexit is a self-inflicted wound. It need not be a death sentence.

Moreover, the political game is far from over. This we British could learn from another European country that fiercely defends its independence and has strong concerns about immigration.

The Swiss example

The Swiss voted in a referendum in February 2014 against “massive immigration” from the EU. Slowly over the next 30 months, the reality sank in what losing access to the EU would mean for Swiss business, health care, tourism and building industries.

That turned around Swiss public opinion and now the Swiss parliament has come up with a compromise on free movement that respects EU principles.

Voices from the continent should also be much clearer about the limitations of the Tories’ hosanna concept — that the World Trade Organization can provide a sufficient framework for commerce with the continent.

There are many problems with that. For example, since the WTO does not cover aviation, the boss of Ryanair, Mike O’Leary, told the European Parliament in July that planes from Britain could not fly to European destinations if Britain did not abide by EU aviation rules on the Single Sky and retain membership of the European Aviation Safety Agency.

Never mind that the WTO is not really helpful for most services where Britain runs a trade surplus in commerce with the EU27. 350,000 so-called “EU passports” are issued to financial service firms based in the City. Much of the business of trading and clearing Euros will go to the continent.

What do the Japanese say?

The Japanese can weigh in as well. It was Japanese car firms like Nissan which re-invented the United Kingdom’s car industry in the 1980s and 1990s.

Thankfully, they have made clear that, if they lose access to sell their cars to 450 million middle class consumers in Europe, then future investment in Britain will dry up.

All of that is the steep – and very predictable – price that we Britons must pay if our current government rejects every EU rule and the supervisory authority of the European Court of Justice. Britain is poised to enter the economic version of a Dignitas clinic.

Chaining ourselves to such a course, against all the economic evidence, at least borders on madness. At a minimum, it violates the sense of pragmatism for which British Conservatives always laud themselves.


A democracy that cannot change its mind ceases to be a democracy.

Remember that the Brexit referendum was advisory, not legally binding.

We Britons generally pride ourselves that we put economic facts over political ideology. If only it were so.

It’s time for clear statements from Britain’s friends in Europe that damage from Brexit is a self-inflicted wound.