IF economic growth were fuelled by uncertainty, Blighty would be booming mightily right now. The sheer breathtaking scale of the doubt created by the Brexit shambles has been in evidence throughout this week as the UK Government has continued its hapless negotiations with the European Union.
Unfortunately for the beleaguered and divided UK Government, surely rocked by the forced publication of a Brexit analysis laying out the likely huge cost of leaving the EU, uncertainty does not fuel economic growth. It does quite the opposite.
Ahead of this week’s negotiations, and as the latest scene in the UK’s Brexit farce has played out, the business community has appealed loudly again for clarity over Brexit. Amid growing skills shortages, the Confederation of British Industry on Saturday urged swift clarification of the position on immigration.
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This week started with the revelation farmers have had to leave thousands of tonnes of fresh fruit and vegetables to rot in fields because of the fall in the number of workers coming to Scotland from other EU countries since the UK’s Brexit vote.
This story by Peter Swindon in the Sunday Herald flags one example of the developing labour market crisis in the UK. An example that is surely easy enough to understand even for those among the Brexit-minded politicians who give the impression of having a limited awareness and knowledge of basic economic issues.
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The business community has been making it clear, ever since the June 2016 Brexit vote, that clarity on crucial issues, such as the future rights of people from other EU countries to live and work in the UK, is a matter of urgency.
Sadly, it seemed the only thing Business Secretary Greg Clark could make clear on Wednesday was that he would not be providing clarity on the UK Government’s desired future relationship with the EU.
Mr Clark told the BBC: “This is a negotiation which is about to happen. We can’t guarantee an end-state until it has been agreed by both sides.”
This followed the revelation from British Chambers of Commerce that its president, Francis Martin, and its director-general, Adam Marshall,
had written an open letter to Prime Minister Theresa May, “making an urgent appeal for clarity on the Government’s objectives”.
They urged the UK Government to make key choices and deliver a clear statement of intent – so businesses of all sizes and operating in all sectors “can make decisions for the future”.
Surely the UK Government must understand the extent to which uncertainty weighs on economic growth and, by extension, people’s living standards. Since the Brexit vote, businesses have been hamstrung in their decision-making by the mystery of the UK’s future relationship with the EU. Useful steers about the direction of travel have been thin on the ground as the divided UK Government has gyrated like a 1970s disco dancer from one stance to another and back again.
Where this decision-making by businesses relates to investment, many such projects have and will be put on hold. The signs are it is the big, long-term investments that are being hit. The so-called “investments” which are basically capital expenditure to enable cost-cutting, and therefore add little to overall economic output and sometimes detract from it, seem far more likely to be going ahead in this grim climate than the meaningful projects which might boost gross domestic product.
The impact of Brexit on the labour market is also easy to see across myriad sectors of the economy in Scotland and the UK as a whole, including technology and hospitality as well as farming.
Mario Gizzi, co-founder and director of The DRG (Di Maggio’s Restaurant Group), this week flagged the fall in the number of European workers coming to Scotland and underlined the importance of such staff to the hospitality sector.
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Commenting on Saturday on subsequently confirmed reports that the UK Government would delay publication of its white paper on immigration, CBI deputy director-general Josh Hardie warned: “From tech start-ups to care homes, not knowing what staff you will be able to access will deter investment.”
And he argued it was “perfectly possible to be clear on people’s rights to work in the UK, for the transition period at least”.
It is imperative the Conservative Government tells us, without further delay, what the long-term rights of citizens from other EU countries will be in terms of living and working in the UK. Hopefully, from the perspective of society and the economy, they will be as close to what they are now as possible.
After all, the UK Government’s own Brexit analysis confirms that remaining in the single market would be by far the least economically damaging of the Brexit options. Although on recent form, it might well not heed its own analysis and, indeed, on the single market issue, it seems determined not to.
Secretary of State for Exiting the European Union David Davis looked relaxed and in good humour as he walked towards 10 Downing Street on Monday with Michel Barnier, the EU’s chief negotiator on Brexit. Mr Barnier seemed more sombre.
In keeping with the exasperatingly bold but vacuous stance of the UK Government on Brexit, we have had a reaffirmation of a determination to leave the EU customs union. But little indication of the preferred form of inferior arrangement. We continue to have all this talk of a “bespoke” deal, as if it were just a matter of the Brexiters going to an upmarket tailor to get the UK kitted out.
Mr Barnier, for his part, had to point out the UK will face “unavoidable” barriers to trade if it leaves the customs union and single market. Of course it will.
Mr Davis might have been relaxed going into this week’s negotiations. But most in the business community are far from relaxed about Brexit. Their worries are, understandably, intensifying as time drags on with no meaningful progress.
The same can be said of many households the length and breadth of the UK. These households have seen their living standards eroded significantly already in the wake of the Brexit vote as real wages have started falling again and economic growth has slowed sharply.
And they, like many businesses, will be fearing, rightly, there is worse to come. The UK Government’s own analysis suggests further heavy damage is the only racing certainty when it comes to Brexit.
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