Escaping groundhog day on the Brexit economic debate

A ndy Burnham’s starting gun on the campaign to rejoin the EU guarantees years more of the same dreary economic debate we’ve endured since 2015. Call it Brexit Groundhog Day. Goldman Sachs supplied last week’s ammunition, reheating estimates that Brexit so far has left our GDP about 6 per cent below where it would otherwise be. Its recipe for recovery is, naturally, more EU integration. A customs union removing rules-of-origin requirements could supposedly lift GDP by around 1 per cent. Single-market membership, cutting non-tariff barriers and restoring financial passporting, offers 2–5 per cent. Full-fat rejoining, it concludes, promises up to a 6 per cent boost. Andy Burnham says a second Brexit referendum is an option Unlike many fellow Brexiteers, I’m not inherently hostile to models that assess trade frictions in isolation or estimate how Britain might have grown without Brexit. Thus far we’ve clearly suffered from growth-sapping trade barriers while leaving any freedoms that might boost growth gathering dust. Top stories 1 Tripsnacking? Finally a travel trend I can get on board with Advice 2 Belgium’s most stylish autumn weekend break — and it’s not Bruges Belgium 3 17 of the best cruise lines for solo travellers Cruises 4 This cosy hotel is perfect for an autumnal trip to the Lake District Lake District 5 How to see the northern lights: 15 top tips Adventure True, I distrust “doppelgänger” models that conjure American-style rapid growth for a Britain that voted Remain. But the Brexiteer retort that “Germany’s GDP growth was worse” since 2016 hardly proves Brexit was costless. Our growth might have pulled further ahead of an economy battered by the Russian gas shock. The studies of business decisions alone imply that a 3 per cent of GDP hit is all too believable. Advertisement The reason I nevertheless find Goldman’s analysis frustrating is because of what it leaves out. Estimating Brexit’s costs isn’t synonymous with the net benefits of rejoining. The EU is a political union with a vast, evolving regulatory apparatus, not merely a trading bloc. Rejoining means accepting its future rules on technology, energy and commerce too. Goldman offers no speculation on the costs of accepting those rules. Andy Burnham’s EU rethink is a grenade-shaped puzzle for the SNP Actually, it treats all regulatory alignment as synonymous with removing trade barriers. Yet, curiously, in May, the very same authors admitted that Britain could benefit from more AI-fuelled innovation by “avoiding overly restrictive regulation (like that of the EU)”. Why leave that example out when exploring the economics of re-joining? Top stories 1 A grand coastal bolthole or a 17th-century rectory for £1.5m? Property & Home 2 The Horses review — lunch with an influencer, Topjaw’s Jesse Burgess Food & Drink 3 Hugh Fearnley-Whittingstall: ‘My kids tell me to back off when they cook’ The Sunday Times Magazine 4 From gold to tech stocks: how to build the perfect investment portfolio Saving & Investing 5 High street banks are on borrowed time Saving & Investing This concern is hardly abstract. AI is a burgeoning general-purpose technology, and EU rules and attitudes have already slowed its arrival. A June analysis from the Centre for the Governance of AI of 375 model releases by Meta, Google, OpenAI and Anthropic found that Britain delayed or withheld 7 per cent, against 11 per cent for the EU. Most commented 1 The Horses review — lunch with an influencer, Topjaw’s Jesse Burgess Food & Drink 72 comments 2 My father’s Facebook posts about ‘our special angel’ make me cringe Parenting 22 comments 3 Tripsnacking? Finally a travel trend I can get on board with Advice 28 comments 4 Hugh Fearnley-Whittingstall: ‘My kids tell me to back off when they cook’ The Sunday Times Magazine 14 comments 5 Bill Bailey: A heckler told me to get a haircut — I refused for 40 years Theatre & Dance 33 comments Future policies could create fresh obstacles to rollout. The European Commission’s proposed Cloud and AI Development Act, which Burnham is said to want Britain aligned with, would restrict American frontier labs from doing sensitive government work, even if they offer better value. Advertisement It’s not just AI. Britain’s right-wing parties want to scrap or dilute net zero rules. EU law, however, requires renewables to supply 42.5 per cent of the bloc’s energy by 2030, and each country to cut homes’ average primary energy use by 16 per cent from 2020 levels. Rejoining would obviously bind us to these mandates. Criticise EU regulation for harming growth and you’re typically told that British voters don’t want deregulation anyway, or that we could champion reform from within. Perhaps ask Mario Draghi how easy the latter is? At home, a parliamentary majority can at least change a law. EU reform typically requires a Commission proposal, European parliament approval and a qualified majority of governments. Why is Andy Burnham rethinking Brexit? Even with little regulatory divergence today, then, treating the option value of policy freedom as worthless is unjustifiable and requires all sorts of contortions. Access to the protectionist “Made in Europe” procurement proposals gets chalked up as a gain, rather than a restriction on our government sourcing worldwide. EU tariffs on Chinese electric cars get ignored, despite freer trade supposedly underpinning the economic case for rejoining. Again, Brexit has certainly had significant net costs to date. But if we must debate the case for rejoining, can we at least explore the whole ledger? Advertisement Ryan Bourne is an economist at the Cato Institute and editor of the book The War on Prices