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2 September 2021

Remainers lost the argument on free movement – and the UK is paying the price

The labour shortage crisis exposes the cost of Brexit but we should not pretend there was an easy alternative.

By David Gauke

My local Indian restaurant has always had a thriving takeaway service. Similar to many such establishments, it had to rely upon it when we entered lockdown 18 months ago and the restaurant was closed. Now, the restrictions have been lifted but the restaurant remains closed. On my last visit to pick up our Friday evening curry, I asked the owner why. “We can’t get the staff” was the answer.

It is a familiar story. Employers are struggling to recruit and retain staff, resulting in services to customers being reduced. The most eye-catching example has been the shortage of lorry drivers which is resulting in empty supermarket shelves and other supply chain problems.

Not all of the labour shortages can be attributed to Brexit. The pandemic has resulted in some young people staying in education longer, some older people are deciding to retire earlier and some people of working age have got used to spending less time at work and are quite content to keep it that way. In the case of lorry drivers, 25,000 fewer people obtained an HGV license in 2020 compared to the year before. But it would be absurd to deny that Brexit has had a very significant impact upon the labour supply and that we are beginning to see the consequences.

Again, looking at HGV drivers, according to the Office for National Statistics, the number of EU lorry drivers in the UK has fallen around 15,000 – a third – since we left the EU. Given the shortage of newly qualified UK drivers, we might have expected the number of EU drivers to have increased not fallen but for Brexit.

There is, of course, an argument that the labour supply shortages will benefit some UK workers who will no longer face the same level of foreign competition. James Bloodworth made that point on these pages, describing how his HGV driving brother-in-law will be able to earn more. But in aggregate, the consequences for the economy of suddenly restricting labour supply in the way that we have are bound to be negative. Even if we look just at the consequences for the low paid as a whole (who, it is argued, lose out from competition from “low-skilled” immigrant workers), lower economic growth, worsening public finances and higher inflation will not make a happy combination for most.

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The current situation ought to be a source of embarrassment for a government. Contrary to the promises that all would run smoothly or even that food prices would fall as we removed tariffs for non-EU trade, we start to see the visible manifestation of our new relationship.  And we have not even begun to check imports from the EU, something which is due to commence next month unless there is a further delay.

All of this is true. But the situation also raises some difficult questions for those of us who think that we need a closer relationship with the EU than is provided by the Brexit trade agreement. Sanitary and phytosanitary alignment, for example, would reduce border checks between Great Britain and Northern Ireland but this and other targeted and incremental measures to address the shortcomings of the current trade deal would not solve our current labour shortages.

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The fundamental issue here is that our problems stem from ending freedom of movement of people and, in the view of most of those who voted Leave (and quite a few of those who didn’t), ending freedom of movement was central to what Brexit was all about. 

This brings us to the dismal history of our departure from the EU. Nigel Farage, from 2004, turned the debate about our membership of the EU into a debate about immigration; David Cameron, in his EU renegotiations, set out unrealistic objectives in reforming freedom of movement and failing to achieve them put the Remain side on the defensive; Vote Leave focused relentlessly on immigration in the closing weeks of the referendum campaign; Theresa May concluded that any deal with the EU that meant we did not end freedom of movement would not be accepted as delivering Brexit which meant leaving the single market. This was a choice that came with a considerable economic cost but even that was insufficient to satisfy Brexiteer MPs and voters.

To be clear, I supported May’s deal and think that the country would be in a much better position than it is now had it succeeded. But on the specific issue of labour shortages, it is hard to deny that we would be in much the same position had her deal gone through. 

Only if we had embraced a Norway-style relationship and membership of the European Economic Area would we have avoided this issue. Again, that is economically a much better outcome than what we currently have but it is a model easy to attack – we would be “rule-takers” with “no voice around the table”, it would make Brexit “pointless”. 

Brexit does not need to be as damaging as it is proving to be but the current labour shortages highlight that even a more pragmatic approach would come at a cost. And that provides a challenge for those wanting an improved relationship because unless we have a much closer relationship – with all that that entails – not every major Brexit problem is solved. When it comes to our relationship with the EU, the middle ground is very hard to defend.

[See also: How to solve English cricket’s summer problem]