To call the economic outlook for Europe confusing would be an understatement, following the announcement that the House of Lords would not appeal the House of Commons’ decision to overrule them. Prime Minister Theresa May is now free to begin the process of removing the UK from the EU.
The election result in Netherlands has endorsed incumbent Prime Minister Mark Rutte’s pro-EU stance. The result also put a ‘stop’ to the populist rhetoric on Brexit and Trump. If this trend continued in France and Germany in which elections are due this year, EU would be saved.
It’s a gamble for Britain’s economy, although to date the UK has weathered the economic storm. While the Remain campaign, which opposed Brexit, claimed doom would follow the decision, the British economy grew 0.6 per cent between July and September 2016 in spite of the pound’s precipitous drop immediately after the referendum. The weaker pound is a double-edged sword, not only increasing import costs but contributing to an increased number of holidays to the UK!
Philip Hammond, the Chancellor of the Exchequer, has been optimistic regarding economic growth, predicting higher growth in the future than earlier forecasts. This optimism should be tempered by the fact that the relatively plain sailing so far is in part a result of the UK’s status as a member of the Eurozone and its economic benefits.
There is an enormous amount of uncertainty as to whether the post-Brexit UK will have access to the European single market, which has been contingent upon four freedoms. One of these – the free movement of people – was a major reason for Brexit. For Britain to access the single market would require a ‘back door’ deal and there has been no evidence of one so far. Hammond, in response to concerns over this arrangement, has threatened to turn
Britain into a tax haven.
The EU also has reasons to see Britain fail. As some Euro-sceptic parties have gained traction across the Continent, the EU is under pressure to show a strong hand towards a post-Brexit Britain: the fear is that if the UK can demonstrate that it can survive outside the EU, it will boost the economic argument for leaving the Eurozone in mainland Europe.
Considering that the French election starts next month, that’s a real concern. Marine Le Pen, the Front National’s charismatic head, has made Euro-scepticism a pillar of her policies, alongside a strongly anti-immigrant stance. If Le Pen did win, it might fatally wound the European Union.
Will Scotland remain with the UK?
Britain’s economic situation is further clouded by the question of what happens to Scotland, which voted nearly two-to-one for staying in the EU. Nicola Sturgeon, the First Minister, has drawn on Scottish resentment of being forced to follow England’s will, calling for a second referendum on independence from the United Kingdom. While the 2014 vote saw 55 per cent of Scottish voters in favour of staying with the UK, membership of the EU wasn’t at stake then.
Even if Scotland voted in favour of leaving the UK, the centuries-long economic bond between the countries would leave the newly sovereign state in a precarious position. The sudden creation of independent Scotland would call into question, for example, whether the North Sea oil fields belong to them or Britain.
In many ways, the answer to Britain’s econo-mic quandary lies abroad. From America, Trump has shown a bond to the UK (his mother was Scottish). Yet, with accusations from Trump’s spokesman, Sean Spicer, that the British intelligence services were responsible for wiretapping the president, the infamously volatile president’s offer to put Britain at the front of the business queue might come to naught. The Commonwealth is another potential trading partner: it is suggested that an independent UK could deal more effectively with countries including India than through the EU. However, while four Members of Parliament raised the importance of trade with India in February, the British government’s intransigent line on immigration may hamper further progress in this area.