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6 December 2022

Starmer’s wrong – everyone knows we’d be better off reversing Brexit

We've been here before: you can’t get the benefits of closeness to the EU without rejoining its single market.

By Jonathan Portes

Let’s give Keir Starmer the benefit of the doubt. There is plenty of evidence that, just as predicted by the vast majority of credible economists, leaving the EU and the single market has had a substantial and negative impact on UK growth. Even the small minority of economists who supported Brexit now only claim that the damage is often exaggerated, not that it doesn’t exist.

So when Starmer said that membership of the single market wouldn’t boost economic growth, let’s assume that he wasn’t denying the obvious, but arguing that – starting from this position – seeking to rejoin wouldn’t help. There are two planks to this argument. First, that the inevitable result would be years of uncertainty, which would – as during the Brexit process itself – damage growth. 

But it’s hard to stand this argument up. To date, the most obvious signs of the damage of Brexit have been to trade and investment. If uncertainty, rather than Brexit itself, had been the main problem, then we would have expected to see things get better rather than worse after the election of a hard Brexit government in 2019 and the full implementation of a hard Brexit in January 2021. That’s not what the data says so far.

It’s reasonable to argue that businesses, especially multinationals, would have delayed some investment decisions to see the details of the post-Brexit UK-EU trade deal, and whether there would be new barriers. It’s far less obvious that they would do so because of the possibility of future trade liberalisation between the UK and the EU, any more than they’re delaying now because they’re waiting to see what happens with a UK-US trade deal. The possibility that things might get better or easier in the future is not usually a reason to reduce investment.

Starmer’s second argument is that he can get the gains (of a closer trading relationship with the EU) without the pain (of rejoining the single market), by “making Brexit work” and improving the existing deal. There’s an obvious contradiction here: if his changes to the current deal are actually substantive and they change facts on the ground for business, then they will by definition create the uncertainty he warns against. And if they aren’t, then they won’t help.

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But even leaving this aside, it’s highly questionable whether the sort of changes he is proposing will move the dial on UK growth. There’s no doubt that some form of alignment on food standards with the EU would help the agri-food sector – and would have the important benefit of making the issues with the Northern Ireland protocol much more manageable – but the macroeconomic impacts are likely to be quite small.

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We’ve been here before. Theresa May also sought to square a “hard Brexit” with minimal economic damage; indeed, her proposals included a form of customs union with the EU, which is considerably more ambitious than anything Starmer is offering. Yet most analyses found that this would only mitigate part of the damage; for example, we at the UK in a Changing Europe estimated that it might reduce it by less than a quarter. While such estimates are highly uncertain, this gives a sense of the limited nature of his ambitions.

Nevertheless, Starmer has got one thing very much right. There are those who seem to think that rejoining the single market, or even the EU itself, is a magic get-out-of-jail-free card for the UK economy. But, as he pointed out, “low growth in our economy has been going on for 12 years. It preceded Brexit, it preceded Covid and it preceded Ukraine.” The causes of the UK’s relative economic decline – austerity, over-centralisation, failures in education, skills, housing and infrastructure, and poor governance – go far beyond Brexit, and so must any solutions.

[See also: Growth through devolution will be Labour’s election pitch

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