Britain’s complacency over Brexit will end in humiliation

Opinion piece (The Guardian)
Simon Tilford
02 May 2017

Most countries think they are special, but few have ever allowed their sense of exceptionalism to damage their interests in the way Britain is doing. British politicians, business leaders and newspaper editors are remarkably confident that Britain will flourish outside the EU. While both France and Germany sometimes bridle at the EU, neither seriously thinks that the EU diminishes their ability to pursue their interests. There is no justification for British over-confidence. The UK needs the EU as much as the Germans or French do.

The British are less Eurocentric and anti-American than many other Europeans, and are more likely to move to non-European countries. Britain has a global reach in ways that most other EU countries do not, with its permanent seat on the UN security council, and serious military and nuclear weapons. But the French elite do not believe that France’s ability to defend its interests – which are similar to Britain’s – is held back by its EU membership. The French have always understood that France could only remain a significant global power by harnessing the weight of the EU as a whole. The benefits of EU membership for Germany are obvious: the country regained legitimacy and respectability by subsuming itself in this multilateral project, and reasserted itself internationally through the EU.

Why do many of the British elite believe they do not need the EU, unlike their French and German counterparts? One reason is their rose-tinted view of Britain’s history. Britain did not need to rebuild its international reputation in the same way as Germany did after the war. But too many see Britain as a beacon of democracy and liberty. Too few are aware that the country’s colonial history means that much of the rest of the world is more ambivalent – and that Britain is less trusted and admired – than they imagine. EU membership often helped to mitigate these historical tensions, while allowing Britain to punch above its weight by enabling it to act as a bridge between the EU and the US.

A second reason for the hostility – or at best ambivalence – of the British elite to the EU is that they always resented Britain playing second fiddle to the Franco-German axis. Not joining the EU’s precursor until 1973 meant that it always looked like a Franco-German project that privileged French and German interests to the detriment of Britain’s. The British elite have never been able to support wholeheartedly a European project that they were not the leaders of and whose institutions looked insufficiently British. This, as much as an aversion to sharing sovereignty, explains their antipathy to the EU.

Britain’s sense of economic invulnerability is even more puzzling. Why does a country that is significantly poorer than Germany, with fewer internationally competitive industries and greater dependence on foreign capital and managerial expertise, believe it can afford to quit the single market? Britain’s economic performance is no better than France’s and on some important measures – especially productivity – far worse. Yet nobody from France’s political mainstream seriously thinks that the French economy would thrive outside the EU.

Much of the British elite know little about how Britain’s economy compares. Few realise that three-quarters of the country is poorer than the EU-15 average; that Britain’s growth performance has been mediocre at best; or that there are relatively few British-owned and managed businesses with a strong record of growth. There are bright spots in the British economy, but its commanding heights owe much to foreign capital and expertise. Foreign-owned businesses generate more than half the country’s exports, and many of these exports are intermediate goods – links in international, predominantly European, supply chains. These companies are especially vulnerable to Britain leaving the single market. If the British economy were more locally owned and managed, it would be easier to understand the British complacency over the economic impact of Brexit. But for a developed country so dependent on foreign capital to do something so damaging to its ability to attract that capital has few precedents.

Most of the British elite lives in London, Europe’s only truly global city, and this seems to seduce them into believing that Britain is more important and powerful than it really is, and its economy more dynamic. London has had a good 30 years. But much of that is the result of its success in carving out a profitable link in Europe’s division of labour: financial and other business services.

Another key reason for British complacency over the impact of Brexit is that much of the country’s elite buys into the idea of the EU as a sclerotic economic failure. The EU faces serious challenges, but it is far from the British caricature of it as protectionist, insular and economically illiberal. In reality, the EU’s single market is more open than the US market. And the EU has a good record of defending things the British claim to be upholders of – international law, rules-based trade and human rights.

Britain is heading for humiliation. The country’s already mediocre economic record is set to worsen further. It will be alienated from its closest allies – the rest of the EU – and have little international influence. Reality will eventually kick in, which might prompt the British elite to push for the country to rejoin the EU. In all likelihood, it eventually will, though on inevitably worse terms. And it will then have to spend the next 20 years painstakingly rebuilding the influence that it so casually threw away.

Simon Tilford is deputy director at the Centre for European Reform.