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27 October 2016

We’re beginning to see what Brexit might look like

 If success means sluggish growth and increasing the amount that the state has to pay to large multinational companies to persuade them to stay, there is growing evidence that Brexit may be a success.

By Stephen Bush

Today’s growth figures are out, and they show no signs of a post-leave vote slowdown, with growth down by just 0.2 per cent, to 0.5 per cent in the third quarter of 2015.

But the really good news is that Nissan will make the next generation of the Qashqai at their factory in Sunderland. Local MPs and the government had both feared that Britain’s out vote would result in the closure of the plant, or at least a dramatic reduction in the size of its operations.

Instead, production will continue, saving 7,000 jobs directly, and many more in both the pipeline and in servicing the needs of the factory’s employees.

All of which is causing the Brexit boosters to proclaim that the fears of the Remain campaign have been shown to be Brexit boosters have leapt on the news, arguing that it shows that the worries about Brexit were a fuss over nothing. Are they right?

Well, sort of. As I’ve written before, it really is worth remembering that we haven’t actually left the European Union yet. And as Mark Wallace – himself an unapologetic Brexiteer – notes, it is fairly clear that, rightly or wrongly, the markets regard Brexit as a bad thing. Many seem to still be betting on an incredibly soft Brexit – or no Brexit at all.

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So, anyone celebrating the “success” of Brexit or pointing out that it has failed needs to wait a little while. But even these good figures show some cause for alarm – there is a contraction in the construction industry, generally the canary in the coal mine as far as the British economy is concerned.

And what about the Nissan deal? Reuters are running a story saying that they agreed to continue operating in Sunderland after the government pledged to support and if need be compensate Nissan should Brexit make it harder to operate in the United Kingdom. Neither Downing Street nor Nissan have commented, though Nissan thanked the government for its “support and assurances”, when announcing the deal. I am told by a well-placed source that Nissan did indeed receive guarantees about the future of the plant from the government.

We can expect to see a lot more of that sort of thing in the future. As I’ve written before, the government’s best-case scenario involves not cutting, but likely increasing the amount that it pays both to the European Union and to the EU27 for a level of access to the single market that allows the City of London to maintain its primacy as a financial centre. It’s striking that Theresa May has kept a firm line on increasing British sovereignity, by getting out of the European Court of Justice and freedom of movement, but not on reducing the size of the United Kingdom’s contribution to the Brussels budget. 

So as ever with any story proposing the “success” of Brexit, the question comes back to how you define success. If success means sluggish growth, and increasing the amount that the state has to pay to large multinational companies to persuade them to stay while still handing over cash to Brussels, there is growing evidence that Brexit may be a success. If success means equalling or exceeding the growth of the United Kingdom within the European Union, while freeing up a cash bounty for public services, the prognosis is less good.  

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