Friday 29 July 2016, Rossa Minogue

The UK economy after Brexit

Podcast of Rob Lyons' opening remarks from this week's Academy of Ideas Economy Forum

The vote to leave the European Union has left the world’s economic experts, politicians and economic officials stunned. Voters were told that leaving the EU would hit the UK economy hard, with the only question being over what future arrangements might be made with the EU. If the UK negotiates membership of the European Economic Area, the so-called ‘Norway option’, then trade would be largely unaffected. But such a deal would almost certainly require the UK continuing to allow free movement of EU citizens into the UK, something that is currently regarded as politically contentious. The alternatives, from a Swiss-style bespoke arrangement to a situation with no deal at all, with trade governed by World Trade Organization rules, seem to offer a sliding scale from ‘very negative’ to ‘disastrous’.

A minority, particularly the Economists for Brexit group, argue that leaving the EU will allow the UK to trade freely with the rest of the world and ditch pointless EU regulations, with the prospect of a revival in economic growth as a result.

But when it comes to future prosperity, is there too much focus on the UK’s status within Europe? A week after the vote, the government reported another damning set of current account statistics, confirming how much more Britain imports than exports. The government finances still look weak and there is an ongoing and anguished debate about the poor productivity of the economy. George Osborne’s declared aim of ‘rebalancing’ the economy, both between North and South, and towards manufacturing, seem to have come to nought. And the economies of the Eurozone hardly seem in the best of health, either, with the only question seemingly where the next crisis will hit. Greece? Italy? Perhaps even France?

So what does the future hold? What kind of deal should the UK aim to strike with the EU? While we fret about Europe, should we really be worrying about problems closer to home?

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