No deal is the best deal for Britain – and the EU too
Europe has a lot to gain from a thriving, independent Britain, says Matthew Lynn.
With only three months left, and with the Covid-19 crisis still absorbing our leaders’ energies, the chances of a trade deal as our transitional agreement with the EU comes to an end seem more remote that ever. Britain appears to have reconciled itself to leaving without any kind of arrangement. Most of the EU is slowly coming to the same conclusion. The gulf between the two sides looks too wide to be bridged. The EU wants Britain to remain within its legal and regulatory control, while the UK wants to make its own laws, and set its own standards. Both sides would prefer not to do a deal than compromise on those principles.
Some much needed competition
That is reasonable. The British have rightly concluded that the cost of tariff-free access to the EU market is too high for the rather minimal benefits. Most of the tariffs are fairly minor, and can easily be absorbed by the exchange rate, and while there would be some benefits from eliminating them, that can more than be made up for by growing new industries free from European regulations. And, in truth, if it was thinking straight, the EU should see that it too has a lot to gain from a successful no-deal Brexit.
First, the UK would provide some much needed regulatory competition. To listen to the centralising bureaucrats in Brussels you might imagine that a close neighbour with a slightly different regulatory, legal and tax system is a threat. It would lead to “social dumping” (code for “making things a little cheaper than the person next door does”), hand power to unchecked corporations, and undermine their labour and environmental standards. But that is not true. Competition is a good thing, and that is just as true of tax and regulation as it is of anything else. A free-market neighbour would be a check on the centralising ambitions of Brussels, and a model for innovation, which is just what the EU’s economy needs. It would make it slightly harder for eurozone governments to raise taxes and impose new rules, and it would force them to think harder about which ones worked and which didn’t.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Second, a no-deal Brexit might well turn Britain into an offshore hub, with a deregulated, low-tax model. But would that really be such a terrible outcome? Much like Hong Kong for China, or Singapore for the rest of southeast Asia, a deregulated, freewheeling UK could funnel a lot of trade and investment into the rest of Europe while not being bound by its rules. Singapore and Hong Kong have done a lot to boost their whole regional economies. The UK could play the same role for the rest of Europe.
Finally, surely it is in everyone’s interests for the UK to be as successful as possible after it leaves the EU. The UK is one of the largest markets for the rest of Europe, so the richer we are, the more we will import, which means EU companies will be able to grow more quickly as well. At the same time, with no deal, and with regulatory divergence, it is inevitable that some companies will have to move operations to different countries to stay within the EU and preserve full access to the single market. Those countries will gain some extra jobs that wouldn’t exist if there were a trade deal.
Sure, there is a big downside to a successful no-deal outcome: it will show that leaving the EU can work. If the UK departs without any formal arrangement, and does so at least reasonably well, then it may well encourage a few other countries to wonder if they shouldn’t follow suit. To hardcore federalists in Brussels, that may be too high a price to pay, and they will remain determined that Brexit should be as catastrophic as possible. To everyone else, though, it should be clear that leaving without a deal should be hugely beneficial. The UK will be richer. It will be a conduit for investment into the rest of the EU. And it will discipline the EU’s mania for over-regulating and over-taxing its economy. The UK should start persuading the rest of Europe that an amicable no-deal exit is the best deal for both sides – and to concentrate on making an economic success of that.
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.
-
Hargreaves Lansdown bumps up cash ISA with £25 cashback - does it beat the wider ISA market?
Just days before the end of the tax year, Hargreaves Lansdown has launched a £25 bonus for those who open a cash ISA on its savings platform. Does the bonus make it a competitive rate, and are you eligible for the cashback?
By Vaishali Varu Published
-
FCA targets finfluencers with new social media guidance
So-called finfluencers have been warned by the UK financial watchdog that they could face prosecution if they fail to follow new rules.
By Henry Sandercock Published
-
Should your business invest in a VoIP phone service?
Here's what you need to know about VOIP (voice over IP) services before landlines go digital in 2025.
By David Prosser Published
-
The end of China’s boom
Like the US, China too got fat on fake money. Now, China's doom is not far away.
By Bill Bonner Published
-
What is the future of Royal Mail in the UK?
With fewer of us sending letters and parcels, the Royal Mail is finding dealing with the nation’s post is an increasingly unprofitable and costly business.
By Simon Wilson Published
-
What's the secret of Manolo Blahnik's success?
Fashion maestro Manolo Blahnik shows little sign of slowing down at 81, and his company notched up a record financial year in 2022. What is the secret of his success?
By Jane Lewis Published
-
Michelle Mone's "tough year of pain"
Michelle Mone liked to portray herself as a working-class heroine who worked her way to the top through grit and determination. But her pedestal is built on sand.
By Jane Lewis Published
-
Trevor Milton, the Elon Musk wannabe, is jailed for fraud
The former CEO of Nikola, Trevor Milton, has been found guilty of lying about the development of the company's electric trucks.
By Jane Lewis Published
-
Directors should think twice before waiving limited liability
Should small-business directors ever provide a personal guarantee in return for bank finance?
By David Prosser Published
-
Why Russia's economy is doing better than predicted
Sanctions were supposed to strangle Russia’s economy, but it seems to be thriving. What’s going on?
By Simon Wilson Published