Is the UK at Risk of Economic Decline Post-Brexit?

If significant trade barriers are established with direct neighbors, economic decline is a likely outcome. My speculation is that leaving the European Union (EU) has already reduced the UK's GDP by a couple of percentage points. The OECD estimates this to be around 4%. However, in the short term, the downturn may be more severe. In the long term, I expect the figures to remain around the 4% mark.

The UK's Struggle Post-Brexit

The UK's departure from the EU has led to a disconnection from many supply chains, resulting in further de-industrialization. Given that UK goods are not renowned for high quality or outstanding innovation, these supply chains can be permanently lost unless the UK takes concrete steps closer to the EU again. This scenario is compounded by the detrimental actions of the Tory government, which has undermined social fabric, healthcare, and imposed heavy taxes and a record debt burden on the populace.

The UK's Continued Economic Strength

The UK left the EU nearly five years ago, yet it remains a significant economic powerhouse. Britain is the 6th largest economy in the world and a massive spender on military resources, including building new ships, planes, tanks, and other armored vehicles as well as communication equipment. Older equipment has been generously donated to Ukraine, given its lower cost than scrapping it.

Comparison with European Union

In the first six months of 2024, the UK became the fastest-growing economy among the G7 countries, surpassing all EU nations' GDP growth. France, for instance, is grappling with escalating debts. Unemployment rates in the UK are half that of the EU average. Initially envisioned as a union to equalize resources between Europe's poorer nations, the EU now faces a sizeable challenge; its economy is one-fifth smaller compared to 1993, despite having 117 million more people.

The Underlying Economic Issues

The root cause of this predicament lies in the contraction of the real money supply, signaling impending economic challenges. The European Central Bank's cessation of quantitative easing (QE) bond purchases has exposed the economic underpinnings of the Mediterranean countries. The ongoing issues within the monetary union are resurfacing, given the ECB holds nine trillion non-performing bonds of corporate debt and plans to add another two and a half trillion within the next 12 months.

The UK's Economic Position

Despite EU attempts to control UK gas and oil, and dominate its financial markets, these efforts have been somewhat unsuccessful. The UK has effectively responded by continuing to sell these resources at market value, positioning itself outside the EU's control. The UK's business banking and stock markets remain the best in Europe, demonstrating resilience and adaptability in the wake of Brexit.

Political Shifts and Future Uncertainties

The recent European Parliament elections have also seen a significant shift towards nationalist parties, potentially leading to calls for EU exit in France, Italy, and Holland. The ongoing fraud scandals such as Qatergate and Pfizergate have further weakened European unity. Meanwhile, Von der Leyen's cabinet formation is seen as a costly move, with the proposed two billion Euro pay increase for top EU officials being rejected.

The economic realities of the UK post-Brexit present an interesting contrast within the broader European context. While the UK has navigated economic challenges with relative success, the EU's foundational issues remain unresolved. The future of both entities will continue to be interlinked, especially in the realm of trade and economic cooperation.