As the shape of post-Brexit Britain becomes clearer, think tanks are being forced to revise their forecasts.
Source - Daily Telegraph - 28/12/30
I'm sure it was purely pressure of space that stopped the BBC website reporting a forecast by the Centre for Economic and Business Research (CEBR) that the UK economy will grow to become 23 per cent larger than that of France by 2035. It mentioned in passing that the CEBR has the UK growing by four per cent per year between now and 2025 and by 1.8 per cent from 2026 onwards, but only at the end of a long report about the Chinese economy overtaking the US by 2028. What it didn’t say was that the CEBR sees UK growth outstripping that of EU countries. The French economy is currently 3.5 per cent behind that of the UK. The CEBR also sees the UK economy outgrowing Germany: today, it is 43 per cent smaller but by 2035, reckons the CEBR, it will be just 10 per cent behind.
True, I don’t put much store by economic forecasts, nearly all of which are about as accurate as Michael Fish’s infamous failure to forecast the Great Storm of 1987. Yet the BBC’s omission is a little odd in that the corporation has been previously been assiduous in reporting think tanks’ economic forecasts for post-Brexit Britain, often making them lead items on the news. To give a flavour, in 2016 it reported that the “CBI cuts forecast amid Brexit dark cloud of uncertainty”. In 2017 it reported “IMF downgrades UK growth forecast on Brexit”, while on the negotiation of the withdrawal agreement in October 2019 it reported: “Brexit Deal means £70 billion hit to UK”
It isn’t hard to spot a slight theme here: when economists were forecasting doom it was big news; when they start changing their minds and decide that actually a post-Brexit UK will outperform the EU it is no news at all. And the CEBR really has changed its mind. Four years ago, in its first assessment of global economic prospects following Brexit, it saw the UK tumbling from being the fifth largest economy to the eight largest by 2030, slipping behind Korea and France. It now sees Britain being overtaken only by India, and holding onto its position as sixth largest economy by 2035.
Economists are being forced to revisit doom-laden forecasts for Brexit because they were so wrong first time around, laughably so in the case of the Treasury. In May 2016 – a month before the referendum – it claimed that a vote for Brexit would, within the space of two years, cause the economy to shrink by up to six per cent relative to its performance if we voted to remain, and unemployment to grow by up to 800,000. In the event, the economy grew and unemployment fell to its lowest level in 45 years.
The Treasury wasn’t alone, though. Virtually every think tank forecast a grim outcome from Brexit. It is little surprise that they did because their forecasts were built on the assumption that there could be no positive outcome from Brexit, except for the government saving a few billion on its contributions to EU coffers. What about the possibility of a post-Brexit UK benefitting from smarter regulation or from trade deals with non-EU countries? These never even entered the equation. Model after model merely measured the cost of greater friction in trade between the UK and the EU.
The economists have some sort of excuse for this: they say they couldn’t possibly foresee how a UK government might use its new-found freedom. Maybe not, but in that case why pump out forecasts at all, when you admit you cannot measure all the factors which need to be measured?
And now here we are, out of the EU, and the shape of post-Brexit Britain is becoming a bit clearer. Not only do we have a deal with the EU, we have rolled over most of the trade deals with had with non-EU countries by virtue of our EU membership. Already we have made progress with a trade agreement with our single biggest export market, the US – a basic deal with which might well be concluded before Donald Trump leaves office on 20 January.
No wonder think tanks are being forced to revisit their forecasts, with the potential benefits of Brexit becoming clearer. It would just be nice if their changes of heart could be reported as boldly as their initial doom-laden forecasts.
The Denial by Ross Clark is published by Lume Books
Comments
Post a Comment