Don’t look back! Escaping the EU’s economic doom loop
Partners:
A powerful narrative dominates contemporary political discourse: that leaving the European Union has condemned the United Kingdom to economic ruin. Official estimates from the Office for Budget Responsibility project a long-run reduction in GDP of four per cent compared to where it would have been if we had stayed in. The National Bureau of Economic Research suggests the actual damage is even steeper, estimating a hit to GDP of between six and eight per cent, alongside a 12 per cent decline in business investment. Cross-Channel freight traffic through vital arteries like the Channel Tunnel has dropped by nearly 30 per cent.
Yet, things are far from rosy on the other side of the Channel. The so-called engine of the EU economy, Germany, has sputtered out, recording a mere 0.8 per cent of total GDP growth since 2019 – the worst performance in the entire G7. France and Italy wrestle with ballooning deficits, mounting debt and anaemic growth rates. It turns out that Britain’s domestic economic struggles look less like a unique post-Brexit anomaly and more like a common malaise among the biggest European economies. Claims about the economic costs of Brexit have been widely criticised as overblown and often ignoring the potential to exploit our new-found freedom to boost economic activity going forward.
Crucially, the European Union’s proposed remedies risk worsening this continental slowdown. The bloc remains ideologically tethered to heavy regulation, an aggressive green transition agenda and an unyielding application of the ‘precautionary principle’. European regulatory overreach is already strangling high-growth sectors, from the outright suppression of advanced genetic crop technologies to the pre-emptive, bureaucratic stifling of artificial intelligence development. These policies do not cultivate growth; they lock in a systemic economic doom loop. Despite this, the UK political class is determined to force all domestic businesses to follow EU food and agricultural rules and pay EU levels of emissions taxes and carbon tariffs on imported goods. Meanwhile, according to GBBC’s report, EU Reset: What the Brexit Reset Deal Will Cost Britain, taxpayers will have to pay the EU for following its rules, even though the claim they will benefit from increased exports is likely to be wrong.
Things are particularly bad when it comes to energy policy. Both the UK and Germany are in a headlong rush to decarbonise their economies towards Net Zero, resulting in both higher prices and less reliability. All of this means a severe decline in energy-intensive industries, although at least Germany moderates the impact for its industrial heavyweights. And yet, the EU wants to go further and faster down this route.
As global growth decisively shifts towards dynamic, less risk-averse markets, Britain faces a pivotal strategic choice. Should we aspire to rejoin the EU or develop a closer regulatory relationship? Or, given the EU’s economic stagnation, is it time to look forward, shed this precautionary inertia and exploit our regulatory autonomy to build a genuinely dynamic, competitive alternative?
