Ten years after Brexit | Political Fix

Key Concepts

• Brexit Economic Impact: The long-term GDP decline (estimated 4–8% by OBR and other studies) and the structural shift in UK trade and investment.
• Incrementalism: The strategy of pursuing small, sector-specific agreements with the EU rather than a full-scale rejoin effort.
• Bond Market Dynamics: The relationship between government borrowing, fiscal credibility, and the "in-hawk" status of the UK to international investors.
• Political Polarization: The shift from blaming Brussels to blaming the Westminster elite, fueling the rise of populist movements like Reform UK.
• The "Northern" Outsider: The political branding of Andy Burnham as a regional leader attempting to bridge the gap between Westminster and the rest of the UK.

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1. Economic Consequences of Brexit

The panel reached a consensus that Brexit has been economically detrimental to the UK.

• GDP Impact: George Parker noted the Office for Budget Responsibility (OBR) estimates a 4% loss in GDP, while other studies suggest 6–8%.
• Investment and Productivity: Delphine Strauss highlighted that business investment suffered significantly as management time was diverted to Brexit-related bureaucracy. Productivity and goods exports have seen sharp declines.
• Market Sentiment: Katie Martin pointed out that the pound’s post-referendum crash and the rise in 10-year gilt yields (from 1% to ~4.7%) reflect a fundamental change in how investors perceive UK risk.
• The "City" Resilience: Despite initial fears of total evisceration, the City of London has proven adaptable, though it remains less influential in European financial markets than it was pre-Brexit.

2. The Path to EU-UK Relations

The speakers argued that a full "rejoin" is currently unfeasible due to lack of public appetite for the required concessions (e.g., the Euro, free movement, and budget contributions).

• Incrementalism: The consensus is that the UK will pursue a slow, painstaking path toward integration, focusing on specific areas like food/drink trade, energy, and youth mobility.
• Geopolitical Drivers: External threats, specifically from Russia and the global trade wars between the US and China, are forcing the UK and EU to align on defense and industrial procurement.
• Customs Union: George Parker suggested that rejoining the Customs Union is the most logical "first big step," though it would require abandoning independent trade deals with nations like the US and India.

3. Political Landscape and Populism

• The "Blame" Shift: George Parker noted that the toxicity of the Brexit referendum created a culture of grievance. With Brussels no longer a target, populist figures like Nigel Farage have redirected this anger toward the Westminster elite.
• The Reform UK Phenomenon: Steven Bush argued that while Reform UK polls well, their leader remains "too extreme" for the majority of the electorate, serving as a candidate for the remaining anti-establishment base rather than a viable government-in-waiting.
• Center-Right Crisis: The panel expressed concern that the UK center-right is struggling to avoid the fate of its European peers (e.g., the French center-right), who have been eclipsed by populist movements.

4. Governance and the "Burnham" Administration

• Fiscal Credibility: Katie Martin emphasized that the UK is "in-hawk" to bond markets. Any new administration must maintain a constructive relationship with these markets by keeping public spending in check and avoiding "magic money tree" rhetoric.
• The Chancellor Dilemma: There is intense internal debate over the next Chancellor. While Ed Miliband is seen as an intellectual heavyweight, his appointment is viewed as a potential risk to the Prime Minister’s authority. Other names mentioned include Pat McFadden and Johnny Reynolds.
• The "Outsider" Performance: Andy Burnham is attempting to project an "authentic" northern identity. The panel noted that while this is a common political performance (similar to Boris Johnson’s "landed gentry" persona), the real challenge is winning over the Midlands, not just the North or London.

5. Notable Quotes

• Katie Martin: "We are literally in hawk to the bond markets and it's absurd to suggest anything otherwise."
• Steven Bush: "One of the tragedies of Brexit is not just the impact on the United Kingdom, but the impact on the EU as a whole... we've become more protectionist."
• George Parker: "Project Fear was Project Reality, but there was a gap in between where it wasn't clear that the damage was going to actually arrive."

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Synthesis/Conclusion

The webinar concludes that the UK is in a period of "post-Brexit hangover," characterized by economic stagnation and a lack of political bandwidth. The path forward for a potential Burnham administration involves a delicate balancing act: managing the bond markets' demand for fiscal discipline, navigating an incremental rapprochement with the EU to mitigate trade friction, and addressing the deep-seated regional grievances that continue to fuel populist sentiment. The panel suggests that the UK's future success depends less on "magic bullets" and more on rebuilding institutional stability and focusing on long-term growth in sectors like technology and professional services.