Four ways Britain can prosper post-Brexit

Flying car © Getty images
One unexpected side-effect of Brexit

Alongside the usual assaults on the self-employed, the raid on pension funds, and the 10p whacked on a packet of cigarettes, all of which are just about standard features of every Budget, Chancellor Philip Hammond’s speech on 22 November is likely to be dominated by Brexit. He will need to put aside billions to pay the divorce bill, or prepare for a “no deal” exit. That is understandable, but wrong.

A few industries aside, the EU makes relatively little difference to the UK one way or another. One neutral study this month suggested at most a 2% drop in exports even with no deal (and we don’t export that much anyway). True, the car industry will be impacted, although the main manufacturers are still expanding in this country. The City will almost certainly take a hit, although the Bank Of England’s forecast of 75,000 job losses is still only around 4% of the workforce in financial services, so it’s hardly the end of the world.

It is remarkable how little impact our decision to leave has had on confidence and investment. We are seeing a slowdown in growth, and we are underperforming the rest of Europe. That is almost certainly a consequence of Brexit. But it is hardly a catastrophe, not even a recession. The meltdown Project  Fear predicted has completely failed to materialise – and there is no reason to expect it to happen now. Instead, the chancellor should focus on the issues that will make a real difference. Such as? Here are four good places he could start.

First, infrastructure. As we leave the EU, it will be more important than ever to open up to the world, and to make sure our trade doesn’t suffer. A new runway at Heathrow and a high-speed rail line from London to Birmingham are only the start. We should be spending money on regional airports and other road and rail links as well, so that people, goods and ideas can flow in and out of the country.

Second, tax. Our corporation tax rate is already scheduled to come down to 17%, which will be one of the lowest in the developed world. But over in France, President Macron is cutting the rate to 25% and in the US Donald Trump is cutting it to 20%. To maintain the differential, we should bring our rate down to 15% and perhaps even 10%. We need to retain our relative attractiveness once we leave the single market. We need lower tax rates to keep global businesses based here – and to tempt more to come.

Third, entrepreneurship. One of the most encouraging trends in the UK has been new business creation. There are now almost 3.8 million companies in the UK, an increase of almost 700,000 in the last three years. Okay, a lot of those are just self-employed people who incorporate because the tax rates are lower. A lot, but not all. It is the tech start-ups in London that get the attention, but plenty of new businesses have been created across the country. A few will go on to be the stars of the future. Why not give them some help – by exempting them from corporation tax for the first five years?

Finally, deregulate. An industrial strategy based on picking winners and making soft loans always ends in expensive failure. But if you deregulate before your rivals, you can attract global investment and allow entrepreneurs to flourish. There are obvious areas such as robotics where we can steal a march on the rest of the word. But there are others bubbling to the surface as well. Such as? Flying cars and lab-grown meat are just a couple of examples. The first country to allow them will take a lead that will last for a generation. Why not make it the UK – especially when we won’t have to worry about complying with EU rules any more.

  • Marek Witkowski

    But some countries in Europe have a lower corporation tax rate. The building of the infrastructure will be useless if the world does not want to open to the UK, now that the UK is desparate for such opening. The meltdown did not happen yet, because the situation in the world is improving. But I with the UK all the best, I am an anglophile.

    For corporate tax rates the author could consult the wikipedia entry, from which he will learn that the present that 17% is not unusual in the European Union, so here goes tax competition. Furthermore, the European Union (I do not think) will tolerate tax competition. As simple as that.

    https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

  • Erwin

    Nice ideas but will never happen.
    Infrastructure: needs loads of public money and rapid planning decisions over complex, many controversial, issues.
    Tax: one of many reasons for business investment decisions and subject to abrupt politically driven changes.
    Entrepreunership: needs to be in areas that ultimately boost exports. These will be technology and R&D based and carried out by major technology companies (mostly non-British) or university enterprises. UK is seen as xenophobic (whether real or not) so will lose out on the necessary skills.
    Deregulation: so many attempts at deregulation at UK and EU level already and examples quoted will be highly controversial (like GMO crops).

  • Chris Bruce

    1) Read Martin Donnelly’s open letter to Parliamentarians 2) Read this clown 3) Draw your own conclusions 4) Write to MW to jettison this column is before its shrinking utility to investors leads to mass cancellation of subs 5) In the spirit of not being a glum-bucket, and building on the flying cars idea – why not be first to fit pigs with wings; if anyone can Brits can…

  • LG

    I love the tax idea. I bet no one will think of funnelling profits through new companies to take advantage of the 5 years tax free.

  • Wisewilliam

    This article really gives no evidence why we should prosper post Brexit. I know so many businesses that will get wrecked. For example my friend runs summer camps in Italy in the summer holidays teaching Italian kids in their school English. They send over hundreds of teachers for a few weeks. Can they take contracts for 2019. Obviously not as they don’t know if they can deliver. Will work permits be required? Etc. So many businesses now work internationally across the EU, not in national silos.

  • Cynic_Rick

    Quote from this article:

    “A few industries aside, the EU makes relatively little difference to the UK one way or another. One neutral study this month suggested at most a 2% drop in exports even with no deal …”

    Oh yeah! Well, here’s another take:

    http://eureferendum.com/blogview.aspx?blogno=86674

    “…what we are putting at risk, with or without a trade deal, by Mrs May’s decision that we will shut ourselves out not just from the EU’s single market but also from the wider European Economic Area.

    What is really terrifying is that it has hardly yet begun to sink in that, entirely by our own choice, we could be sleepwalking towards the greatest disaster to hit our economy since World War Two.”

  • Cynic_Rick

    Quote from this article:

    “Why not make it the UK – especially when we won’t have to worry about complying with EU rules any more.”

    Oh yeah! Well, here’s another take:

    http://eureferendum.com/blogview.aspx?blogno=86671

    “The problem though is that the EU, as a matter of philosophy, is wedded to the so-called precautionary approach. Thus, if we want continued access to the markets of the EU-27 (and the Efta states), we will have to subscribe to the same philosophy.

    Here, the use of the term “philosophy” illustrates why we are going to have problems if we seek a lighter regulatory regime. At their extremes, the “pre-emptive” and “reactive” philosophies are incompatible. If you adopt the former you have, by definition, rejected the latter. Furthermore, the philosophical difference rules out any idea of mutual recognition. Neither regime can recognise the other.

    Thus, come Brexit, we have a choice to make – which regulatory philosophy to adopt. But there is actually no choice. The EU is by far and away our biggest export market and many of our trading partners also adopt EU regulatory systems. We thus choose the EU path or pay a hefty price.”

  • Nick Baldeagle

    My solution? Become part of the USA.