Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

'Hard' Brexit would give UK economy '£135bn annual boost'

'Hard' Brexit would give UK economy '£135bn annual boost'

Brexit could boost the UK economy by as much as £135 billion a year, according to a new study. 

The study was compiled by the Economists for Free Trade (EFT), a 16-strong group of experts, which includes Patrick Minford, professor of Economics at Cardiff University, and Roger Bootle, chairman of Capital Economics.

EFT said mounting evidence that quitting the protectionist EU will transform Britain’s prospects over the next decade. Therefore it urged the gloomy to abandon 'Project Fear' and embrace 'Project Prosperity'. 

Minford rejected a 'soft' Brexit, saying the benefit of quitting the EU will only be realised by a combination of global free trade for Britain – outside the single market and the customs union – plus opening up the UK economy to the positive effects of full competition.

 The report highlighted the surge in national output through a hard Brexit - worth around £5,000 a year to the average UK household - should also be accompanied by an 8% fall in prices.

This, it said, would add an average of £40 a week to such households, raising living standards, creating new, better paid jobs and cutting unemployment. They include a reduction in their bills of £2.50 a week triggered by savings in benefits currently paid to unskilled EU immigrants.

'Hard Brexit is good for the UK economically while soft Brexit leaves us as badly off as before… Hard is economically much superior to soft,' Minford said. 

'Backers of soft Brexit say it would preserve jobs, but what they really mean is that it would preserve existing jobs by stopping competition from home and abroad.'

He added: 'As every schoolboy knows and every politician ought to know, this aborting of competition reduces jobs in the long run…Competition increases productivity and so employment because higher wages paid for by higher productivity makes work more attractive. Competition also increases our general welfare because we are producing more.'

Minford also took issue with chancellor Philip Hammond over his insistence that a post-Brexit Britain would still follow the high tax/high spend/high regulation European economic model.

'To do that would risk simply throwing away our hard-won freedom from EU rules that reduce our competitiveness as a nation; we would be throwing away the very gains from Brexit that we enumerate above!,' Minford said.

'If the EU does not like our new UK rules then it is free to adjust to them as it likes.'

EFT sees the ideal solution would be a free trade deal between the UK and the EU plus new free trade deals with other major economies such as the USA.

One solution, which EFT admits might not be possible although not as radical as it might seem, would be to unilaterally eliminate trade barriers, such as tariffs, for the EU and the rest of the world, so making the UK the driver of global free trade.

'This is unilateral free trade (UFT) whereby we simply abolish our trade barriers without asking others to do the same,' Minford said. 

'The most famous example of this was in 1846 when Sir Robert Peel abolished the Corn Laws, greatly reducing the price of food and helping to stimulate the Industrial Revolution.' 

EFT noted the very threat of UFT would also put huge pressure on the EU to offer Britain a free trade deal because, if it did not, its producers, such as car makers and farmers, would find themselves trying to compete in a UK market flooded with less expensive goods from all over the world.

'The government must abandon the restrictive, protectionist economic strategy that has dominated British economic policy while shackled to the EU,' Bootle (pictured above) stressed. 

'Britain needs an ambitious plan to ensure Brexit creates prosperity and this is what Economists for Free Trade will do in this paper.

'This is a once in a generation opportunity to raise living standards and create new employment opportunities across the country.'

However Open Britain, which is campaigning for the UK to remain in the single market, believes the EFT's proposed plan would damage the UK. 

'Unilaterally scrapping our tariffs without achieving similar reductions in the tariff rates of other countries would see Britain swamped with imports, leaving our manufacturers and farmers unable to compete," said Labour MP and Open Britain supporter Alison McGovern. 

'The levels of bankruptcy and unemployment, especially in industry and agriculture, would sky-rocket. This is a project of economic suicide, not prosperity. No responsible government would touch this report with a barge pole as a source of ideas for our future trade policy.' 

 

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Your Business: Cover Star Club

Profile: Thomas Miller explains its post-restructure plans

Profile: Thomas Miller explains its post-restructure plans

Thomas Miller Investment’s (TMI) head of wealth Matt Phillips has strong opinions about many things

Wealth Manager on Twitter