The new government is seeking closer ties to the EU, but Brussels will not be kind to a prodigal son, writes Paul Ormerod
Clear signals are being emitted by Keir Starmer’s government on the European Union (EU). A much closer relationship is being sought on a wide range of issues such as trade and defence.
For the time being, the Prime Minister has ruled out a formal application to rejoin the bloc. But it would not be a surprise if Labour fought the next election with this in its manifesto.
The vote to leave the EU was held at the end of the second quarter of 2016. Since then, the economy has only grown at an annual average of one per cent.
This is a key part of what is now the prevailing narrative, in which it is held that our economic ills are due to leaving the European trading bloc.
Of course, the UK did not formally leave until 1 January 2021. But once the referendum result was announced, plans were made by companies in anticipation of the UK being out of the EU.
It might be thought, according to this account, that by leaving the EU, the country excluded itself from a dynamic, rapidly growing economy. But the data tell a different story.
In the first quarter of this year, the latest data currently available, GDP in the UK was just 8.3 per cent higher than in the second quarter of 2016. In France the increase was 9.6 per cent, but it was only 7.7 per cent in Italy and 5.8 per cent in Germany.
Someone looking at the data from, say, Mars, entirely unaware of the bitter controversies over Brexit, would conclude that the four largest economies in Western Europe had grown at more or less the same rate since 2016.
These growth rates are certainly slower than they had been previously. But our hypothetical Martian might well conclude that their close similarity suggests a powerful common factor, or factors, at work.
This would be more plausible than believing that one of them, namely the UK, would have substantially outperformed the other large European economies if it had not inflicted massive damage upon itself. This is exactly the implication of the argument that many of our economic problems stem from Brexit.
True, the Eurozone economy as a whole was 10.5 per cent larger than in 2016, but this is due to many of the smaller economies growing somewhat faster than the larger ones. In any event, this number is put in the shade by the 19.4 per cent growth registered by the American economy over the same period.
Regardless, it is clear that the government will try to get closer to Brussels and, as it sees it, mend fences with the EU.
There may well be some minor points where the EU will agree to the UK’s proposals without much of a fuss.
In terms of more serious negotiations, Brussels has form. The EU was certainly ruthless in the Brexit negotiations and the UK ended up with rather a poor deal.
We might reasonably wonder why Brussels would be any less brutal in negotiations during the course of the parliament. The issue of access to UK fishing rights, for example, has already been raised.
The logic is that they have to continue to send signals which deter anyone else from even thinking about leaving. It would set a dangerous precedent if the UK could leave and then snuggle back up, cherry picking concessions as it suits us.
But there is one set of circumstances in which we can be sure that the EU would be charm personified. This is if the UK were essentially to capitulate, to accept EU governance over a wide range of issues whilst remaining on the sidelines as a non-member. Otherwise, the government is in for a very tough set of negotiations.