Brexit: the bet that London does not accept having lost

Article by Romano Prodi for Il Messaggero of 09 January 2022

Romano Prodi could only be described as an Elder Statesman. Always to the left of the political centre he served for many years in the Italian government including a period as Prime Minister. Always dignified and thoughtful he represents a type of politician that no longer seems to exist. 

For more information: https://en.m.wikipedia.org/wiki/Romano_Prodi

Peter.

Original article at: https://www.romanoprodi.it/strillo/il-caso-brexit-la-scommessa-che-londra-non-accetta-di-aver-perso_18375.html

For years people have been arguing about Brexit and today they are hardly talking about it any more: it is therefore worth taking a look at the state of affairs twelve months after the divorce.

In spite of the triumphant tones that Boris Johnson understandably retains, the available data (even those from official sources) show negative consequences with regard to both the development of national income and British foreign trade.

Economic growth is lower than expected and the same official sources predict that, in the medium term, labour productivity will fall by around 4%, precisely because of the fewer links that can be maintained between British companies and those belonging to the European Union.

All this is natural and almost obvious, given the new burdensome bureaucratic requirements that hinder and make trade between Europe and Great Britain more expensive.

These new bureaucratic hurdles and delays, together with the forced defection of many foreign drivers, have led to a few weeks of empty shelves in London’s supermarkets.

However, these events are to be considered exceptional and temporary, even if they received a lot of media attention. On the other hand, the slowdown in the flow of specialist workers from Europe in the health sector, the food industry and many research laboratories and professional firms is worrying.

These shortages and increased bureaucratic impediments not only constitute a permanent additional cost but, especially in the smaller business sector, make integration and fast-track supply relationships more difficult, which are crucial for the productivity of the system. This is why the whole business world is calling for aid and refunds to offset the additional costs of Brexit. At least so far it is therefore not the continent that is isolated from Britain, but vice versa.

Less measurable, but already sensitive in their consequences, are the damages of Britain’s exit from European scientific cooperation, such as the Horizon project, as well as the losses due to the reduction of hundreds of thousands of European students in its language courses, schools and universities.

Added to this is the damage caused by the cessation of mutual recognition of professional qualifications, as well as the complicated and costly health checks that did not exist when the customs union was in place.

Conflicts also remain open over the re-discussion of common standards that were previously in force in vital areas such as chemistry, biology or health.

Equally problematic are developments in the financial field. The absolute leadership of London in the European market was the key to world primacy.

The reaction of Paris, Amsterdam, Frankfurt and Milan was of course immediate. While 40% of European derivatives used to be traded in the City, this share has now fallen to less than 10% and, to date, more than eight thousand people working in the financial sector have moved from London to the continental markets. This is not a massive exodus compared to the nearly two hundred thousand operating in the City, but it is a growing process that is expected to increase as continental markets strengthen.

The British financial market regulators are naturally preparing an appropriate counter-offensive, which would be based above all on a relaxation of the rules and procedures for all those operating in the City. All this even though the formation of a large, less regulated financial market (there is allusive talk of a Singapore on the Thames) would open up new complicated problems in relations between Great Britain and the European Union.

British sentiment in the face of all these events, and above all in the face of the customs regulations concerning Northern Ireland, is therefore on the whole negative: what emerges above all is growing disappointment at the failure to fulfil Boris Johnson’s promises, which promised an immediate recovery as a result of the cessation of the constraints imposed by Brussels. All this, even though the British Prime Minister did not hesitate to take urgent measures to remedy some of the major drawbacks, opening immigration to all potential workers with a contract of employment worth more than a sum equivalent to around €30,000 gross per year, in practice to all workers with a minimum qualification. In a nutshell, Boris Johnson, faced with the state of necessity, has come down from the hobbyhorse he used to make the exit from the European Union prevail and has depowered the debate on emigration.

After all these considerations, one might think of a general revival of British public opinion in the face of Brexit. On the contrary, there does not seem to be any substantial change. I am not personally surprised because the real basis of the decision to leave the European Union was not the prospect of economic gain, but nostalgia for a great past. A nostalgia that was summed up in the simple phrase that ‘London has never been ruled by anyone and cannot be ruled by Brussels’.

After all, this was not a surprising motivation because all decadent empires rule mainly by looking in the rear-view mirror. When, in twenty years’ time, the mirror is completely fogged up, Britain will decide to look ahead again and will do so, as usual, in the best possible way and with the best interests at heart.