Six years of self-harm

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It’s taken six years of economic meltdown caused by Brexit, but at last a senior member of Britain’s ruling Conservative party is saying it’s time to re-join the European single market.

Tobias Ellwood, who chairs the UK’s defence select committee, said the Brexit deal negotiated by the Government had left industry strangled by red tape, and that securing closer economic links with the would help bolster the economy at a time of soaring bills and widespread inflation.

Ellwood, who is one of the 28 Tory MPs to have publicly called on Boris Johnson to resign, urged the prime minister to pursue a Norway-style relationship with the EU.

Norway is not in the EU but has full access to its single market, meaning it enjoys low-friction trade with the bloc, by virtue of its membership of a trade group called the European Economic Area (EEA).

A number of Conservative and opposition Labour MPs campaigned for a Norway-style Brexit following the June 2016 referendum, but staunch Brexiteers argued that it would undermine the UK’s sovereignty. Since then, the UK economy has nose-dived. Brexit has been a disaster.

Johnson and the Vote Leave campaign promised in 2016 that £350m a month would flow back from Brussels because the UK would stop contributing to EU coffers.

The impression was that there would be no downside.

Britain would thrive outside Europe’s bureaucracy which was strangling our companies with red tape. The reality is that red tape has increased enormously – strangling exports and making imports more expensive. Even Johnson now admits to being “overly optimistic”.

Next year the OECD calculates that the UK will record the lowest growth in the G20 with the exception of Russia whose economy is being drained by its war on Ukraine.

The Office for Budget Responsibility says Brexit will have a long-term effect of cutting UK GDP by a hefty 4 per cent, an estimate unchanged since early 2020. The Financial Times says such a decline amounts to £100bn in lost output, and £40bn less revenue to the Treasury a year.

The UK is now behind all the other G7 nations in the pace of its recovery from the pandemic, with exports by UK small businesses to the EU down significantly.

Figures from the Centre for European Reform show that the Brexit vote has already depressed economic growth. The independent thinktank said that by the end of last year the economy was 5 per cent – or £31bn – smaller than if the UK had stayed in the EU. Faced with all this, even arch-Brexiters are increasingly turning on Johnson.

The fishing industry – promised a new lease of life out of the EU – is on the verge of crisis, with rising fuel costs making it almost uneconomic to catch fish, particularly as exporting to the EU is now so burdensome.

The first and most obvious economic blow delivered by Brexit came when sterling fell almost 10 per cent after the referendum in June 2016, against currencies that match the UK’s pattern of imports. It did not recover.

This sharp depreciation of the pound was not followed by a boom in exports as UK goods and services became cheaper on global markets, but it did raise the price of imports and pushed up inflation.

But there is a chink of hope that some of the worst damage could be undone. Boris Johnson and the Conservative party that he leads so shambolically are on the way out.

Every day the demands for Johnson to go grow louder. The chairman of his party has resigned and he has lost the backing of most Conservative MPs. More scandals about his lying and spendthrift habits emerge almost daily. Among the latest were his attempts to get his wife a lucrative Government job and plans to build his young son a treehouse costing £150,000 – but paid for by someone else and priced more than many of the houses where ordinary people live.

But the tide is now moving against him and his party. The opposition is ahead in the polls and the Conservatives have suffered two highly damaging by-election defeats.

Some leading figures in the main opposition Labour party are already talking about re-joining the European Economic Area to mitigate the worst impacts of Brexit.

In the past 6 years many of those who voted for Brexit have changed their minds or died of old age so the idea is gaining traction. But the bigger question is will Brussels ever welcome Britain back?

By Michael Gregson