It Is Economics Not Politics That Has the Power to Overturn Brexit

Britons have returned to work after their holidays and many will have realised that even the prospect of Brexit is starting to make them poorer.

Anyone who went for a trip to Spain, France or Italy will have noticed they received an exchange rate of close to one-for-one with the euro compared with €1.30 before the referendum.

That is an effective 30% devaluation. Whatever they did on holiday, whether it was enjoying a meal out or having a bottle of wine at their hotel, it will have cost them more. Two years ago, a cheap meal out at €10 would have cost £7.70. That same meal this year would cost £10. It is a pretty big difference.

The potential impact on the cost of a package tour will be much higher. Insurance and travel protection costs will be affected by the loss of EU reciprocal deals. Moreover, low-cost airlines have reduced travelling costs and opened up new routes thanks to the EU’s Open Skies Agreement, which removed old restrictions and brought in greater competition. If Britain does not negotiate a comparable arrangement easyJet and Ryanair will become a thing of the past

If the cost of a holiday has increased this year, next year it might rise even further.

On the home front, those who were not able to get away will have felt the pain of rising food prices in the shops as the impact of the fall in the pound has meant that supermarkets have had to pay more to import food from overseas. Food prices rose by 2.6% in the year to July, compared to 1.5% in April.

Rising food prices and holiday costs are just two micro examples of the impact that Brexit could have on a family’s budget. It will also have an effect on employment as the UK becomes a less appealing place for foreign workers and thus the efficiency functioning of a range of activities from safe access to nuclear fuel to picking fruit and veg before they rot where they are planted.

the real danger of Brexit is not leaving the EU per se, but the manner in which it is done

The government’s latest (leaked) plans for managing the 2.3 million EU citizens who currently and mostly work in the UK are a sign of how bad things could get.

The draft paper suggested that the UK would set up a two-tier via system that would offer a two-year only residency permits to low skill EU workers subject to meeting an income threshold. The “low skill” category will probably include fruit pickers, manual labourers, and waiters.

The reaction from employers was instant and angry. The British Hospitality Association, whose members need 60,000 new EU service workers are needed per year just to fill the vacancies, said it would be “catastrophic”. London Mayor Sadiq Khan called it a “blueprint on how to strangle London’s economy”.

This may not be official policy yet, but it shows that the real danger of Brexit is not leaving the EU per se, but the manner in which it is done. If Brexit is implemented in a way that visibly harms how the economy operates, the prices we pay, and the quality of our health service, people will become angry.

If it becomes clear to voters that the way the Government is implementing Brexit will make their lives worse -  whether it is revived tensions at the Irish border, queues at our ports and shortages in supermarkets, and longer NHS queues - they might begin to ask if this was what they really voted for.

In the 1970s, Margaret Thatcher held up two different sized bags of groceries to how the impact of inflation on a family’s weekly shop. Remainers must take an ironical leaf out of her book and talk about how a bad Brexit process is already impacting on household budgets.  

If Remainers can begin to speak to voters on their level, then the highfalutin’ talk of “taking back control” and “regaining sovereignty” might begin to seem somewhat meaningless. Stories about the neoconservative bigotry of Jacob Rees-Mogg, and the tit-for-tat sparring between David Davis and Michele Barnier will annoy rather than amuse.

If by next summer, when Britons head for their European holiday in July and August, there is little sign of progress they might run out of patience. When their cheap evening out costs £11.10 not £10 or even £7.70, then they might even take to the streets.

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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