Brexit pain will bring long-term gain

Leaving the European Union will cause some sectors and businesses to suffer, says Matthew Lynn. But Britain will be better off for it.


Britain should outsource its apple-picking
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The farms are in crisis, and fruit will be left to rot on the trees. Restaurants and bars will close down, leaving many high streets looking even more desolate and abandoned than they already are. Care homes will see spiralling costs and leisure facilities will be shuttered.

Already we are starting to hear lots of reports about the damage done to certain industries by our decision to leave the European Union, and we will no doubt hear many more over the year to come.

Any industry that relies on cheap labour, and on imported raw materials, is likely to face tougher times after we have left the EU. And, yup, some of them will go under. But the important point is this: that is not necessarily a bad thing. In fact, we should welcome the fact that some industries will shrink. It is part of a process of creative destruction which is how countries get richer.

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Let's take agriculture as one example. There can be no question that without lots of low-skilled cheap labour it will struggle. Fruit picking requires a lot of workers, and because the actual apples, pears or blueberries are not really worth that much, it does not pay terribly well. It has certainly come to rely on eastern European labourers who will take pretty much whatever work is available no matter how badly paid. Without them, some of the farms will go out of business. But we don't necessarily need to worry about that.

Apples can be grown in Poland instead indeed, Poland already has the largest apple industry in Europe and shipped over to Britain. In fact, fruit-picking is a very low value-added job. It is precisely the kind of thing that a prosperous economy should outsource to a less-developed country.

Much the same is true of restaurants and coffee bars. Every high street is crammed with places selling cappuccinos and lattes partly because we have all become addicted to caffeine, but also because there is lots of cheap labour to do all the work. End that, and we will see fewer of them and those that remain will probably have more automatic machines rather than real live baristas. But if that space isn't occupied by a coffee shop, and we aren't spending money on cappuccinos, we will spend it somewhere else. That doesn't mean there will be any loss to the economy.

In fact, whole swathes of British industry have become hooked on cheap labour. It didn't invest much in automation, or staff training, or efficiency, because there were always a few more people who could be hired to do the work for not much money. At the same time, there were whole sections of the retailing and leisure industry that only made sense if the pound was high enough to keep their import costs under control.

As they go broke, however, new companies will take their place. In the economics textbooks, that is known as creative destruction. Older industries get killed off, and that frees up resources to create new ones. At the end of that process, an economy is always richer. But in the short term, you hear a lot of complaining from the businesses that are suffering and you hear almost nothing from the new companies that are emerging. That can very easily create the impression that industry is going downhill. But that is invariably wrong.

We will hear a lot in the next few years about industries being hit by our decision to leave the EU. But we should just ignore it. Those sectors might make a lot of noise but they weren't adding a lot of wealth. At the end of it, with fewer low-skilled, low-paid industries such as agriculture, or coffee shops, the country will be just fine even if some apples are left to rot on the trees because of a shortage of cheap workers.

Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.