In November 1942, Europe was in dire need of a bit of good news. It came from Egypt, where after three years of defeats, retreats, setbacks and Nazi atrocities, the British army notched up its first victory of the second World War against Rommel’s Afrika Corps. When Winston Churchill was asked to put the battle into context, he quipped: “Now this is not the end. It is not even the beginning of the end.”
Given that many unionists are fond of military quotations its seems fair to say that the news from Northern Ireland this week might also constitute the end of the beginning. That beginning is the beginning of Brexit, which can be seen as a long-term effort to redefine the UK’s role in the world. The last eight years has been the beginning. It might take years.
It took the UK about 30 years after the end of the second World War and losing India to join the European Union. It seems reasonable to measure the Brexit project – a 21st-century redefinition of Britain – in decades rather than years. In this light we are not at the end of Brexit but at the start of it.
And what a beginning!
The past eight years have been chaotic for British politics and unimpressive for its economy. Since 2016 the UK has had five prime ministers, seven chancellors and countless ministers of various crucial departments – and all that without a change in the party in power. The country has experienced a run on its bond market and its policymaking credibility has evaporated. The economy, maybe not surprisingly, has staggered rather than grown.
The other week I travelled to Donegal, slicing through the North in Fermanagh. The contrast with the South in terms of road quality, road surfacing and marking, not to mention the age of the cars themselves, reinforced the idea that the UK has simply run out of money.
Without money a country atrophies. This week’s theatrics from Belfast – where the DUP, a party that never misses an opportunity to miss an opportunity, finally signed a deal that was more or less on the table in 2017 – underpins the bedlam of the Brexit beginning.
The Brexit-loving DUP has been “holding out” against the equally Brexit-loving Tory government, and this has culminated in a deal that makes Northern Ireland far worse off than it was before Brexit, the Brexit that both the DUP and the Tories promoted.
Meanwhile the people suffer. My Northern family, some of whom work in the NHS, say things have never been so bad, with waiting lists soaring and no money in the hospitals for even rudimentary treatments. At least Stormont can now release some central cash which has been tied up for the years that the Assembly was suspended. The return of Stormont will trigger £3.3 billion (€3.84 billion) from London.
The “waiting for central cash” is one of the dilemmas that the UK will have to fix over the coming years. Over-centralisation is the result of a big economic bet the UK took in the 1980s. The country ran down its regional industries, replacing them with the service sector, anchored by booming finance in London. The plan was for London’s tax revenues to be spent in the regions.
As long as finance and assorted service industries were flying, the deal between southern England and the rest of the UK could be maintained. But growth of the financial industry is based on less rather than more regulation, and Brexit is an exercise in complicating, not simplifying, regulation. After Brexit, more regulation means less money from the City of London, leading to unmarked roads in Fermanagh on a Tuesday night in January.
But it’s not all Brexit’s fault.
Arguably Brexit was the symptom. The cause is years of low productivity, lower incomes and lower investment, all of which underpin wealth and regional inequality fuelling the 2016 anger at Westminster. While there is little doubt that a residual cultural anti-EU sentiment was tapped into, opinion polls before the Brexit vote put “Europe” way down the list of voters’ concerns. A two-tiered society drove Brexit, but its handmaiden – a two-tiered economy – was not the unintended cause of economic policy: it was the precise objective. The “London first” policy, implemented since the late-1970s, resulted in the alienation that Brexit exposed.
When looking at national economics, all economies live and die by productivity or output per employee. In 2016, when Brexit was voted for, the UK had the second lowest productivity among G7 countries, well behind Germany and the US. For every hour worked a German employee produces 36 per cent more than a British employee. Oddly enough, small business in Britain – typically the backbone of Tory support – is a low-performing, low-wage sector. These people championed Brexit.
The big bet on London has gone sour and the UK has to come up with a new plan. Can it do this?
Two-thirds of UK employees work for companies whose productivity is below average, resulting in lower wages for a higher proportion of UK workers (McKinsey) than other countries. The ONS data (UK’s CSO) evidence is that productivity has increased by a meagre 1.7 per cent in the 15 years from 2007 to 2022.
The recent slowdown has been remarkable. In the 15 years before that the UK saw productivity growth of 27 per cent. The UK has a few very good companies and lots of mediocre ones. (Just before we in Ireland sit on our laurels, if we didn’t have multinationals the picture here would be similar).
With Brexit changing perceptions of doing business even in London, a 2023 report from the Centre for Cities documents how the UK’s most prosperous region has seen productivity growth slow since the financial crisis. They estimate that had London’s productivity performed in line with peer global cities it would have added £54 billion to the UK economy in 2019 alone. The model is broken.
The big bet on London has gone sour and the UK has to come up with a new plan. Can it do this? Of course it can. Britain is still a huge economy of close to 67 million people, in service, TV production, advertising, entertainment, marketing and finance it is still among the most impressive in the world. Just look at the way it has repackaged old division one Saturday “Grandstand” football into a global brand
But it needs a new vision – one that is not a negative mandate centred on what Britain is not, as in not European. It needs a positive vision, focused on what the country could be. The only problem is that this may take a long time and the rest of the world is moving ahead – no one is waiting for the UK to get its act together.
And this is why the end of the beginning, although it sounds upbeat, feels far more trepidatious than hopeful.