Shropshire Star

Brexit vote - two years on: 'Move will make us all poorer'

Remain campaigner and former councillor Bill McClements warns that Brexit will have dire consequences for the UK economy.

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Bill McClements

Before the 2016 referendum on the European Union, I predicted that the UK economy would be between four and eight per cent worse off if we voted to leave.

I now concede my figures were wrong. I now predict that we will be more than 10 per cent worse off, probably between 12 to 15 per cent with in five years of fully leaving the EU.

That means everyone will be more than 10 per cent poorer than we are at the moment. It is a lot.

Why do I believe that it will be that bad?

In the wake of the vote in June 2016, the Government had no idea what to do. There were no plans or even case studies undertaken.

Theresa May, who has never been one for making big decisions, reacted as she often does – she dithered. That’s bad for investment in new jobs.

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Immediately after the vote, the pound plummeted in value, and has shown little sign of recovery two years on. The weak pound means we are poorer compared to the USA, the EU, China. Our economy is now performing worse than the other six major economies which make up the G7, and we haven't even left the EU yet.

Theresa May talks about getting a bespoke trade deal for Britain, which gives us the advantages of EU membership without being bound by the EU rules, but she won't get it. Why would 27 countries change everything to suit the one country that says 'we don’t want to work with you anymore'?

So why do I get the figure of 10 per cent from? Well, the world economy is measured in US dollars, all comparisons are done that way. China for instance will only sell to the UK with prices in dollars, they will not accept the pound. I should know, I was in China in January last year to buy machinery for a West Bromwich company, and we had to pay in dollars.

So the first thing to consider is the value of the pound versa the dollar. Before the referendum was announced £1 bought 1.60 US dollars; as soon as David Cameron announced the vote, it fell to 1.50 dollars. Then after the leave vote the pound fell to 1.22 dollars. It has since recovered to about 1.34 dollars. I cannot find any reason to believe it will ever recover to more 1.45 dollars, and every day Iisten to international investors and bankers.

With the pound weaker, at 1.45 dollars or worse, our national income will be 9.3 per cent lower than it should be.

Brexit will have a big impact on British industry, says Bill McClements

Secondly, consider how our economy is growing now. Last year and this year because of the uncertainty our economy is growing at least 0.75 per cent slower than the EU and the USA, and indeed, for that matter, how the UK economy was doing prior to the vote.

By the end of 2015 that cumulative effect will mean our economy in pounds will be 5.3 per cent lower than it should be, so combining this with the 9.3 per cent fall in the economy due to the weak pound, we end up with an economy which is 14.6 per cent weaker than it should be.

This is the methodology I was trained to use when making investment decisions and evaluations when working for the TI Group, in the private sector.

Now, of course, with such forecasts there is always a margin of error, and from my experience of this type of evaluation it can be 25 per cent out, either up or down. That is why I say that we will be at least 10 per cent poorer, but it could be 12 to 15 per cent.

Now, some people will say that a weaker pound doesn’t matter as we can sell more.

It is true that we can sell more with a weaker currency, but it also means that all imports and raw materials are more expensive. Since the referendum gas and electricity prices have gone up, food is dearer, and medicines from abroad are more expensive. Britain's defence budget is in trouble, there is said there is a £20 billion black hole, because all troops going abroad to Germany, Afghanistan, or wherever will cost 15 per cent more. The Ministry of Defence buys lots of its equipment from the USA and Europe, which again costs 15 per cent more. The cost of defence will be a big problem, with there already being talk about reducing the number of servicemen and doing away with landing craft.

Fish and chips have gone up in price. Despite moaning about the EU, fishermen find that with the weak pound they can get 15 per cent more by selling to the EU, so they are charging UK buyers the higher price. There is no loyalty to the UK from our fishermen.

A weaker economy means we are poorer than we would have been, poorer than the EU, poorer than the USA. We will not fully appreciate that because everyone in the UK will get poorer at the same rate, but if you go abroad you will suddenly realise that we are poorer.

So what does 10 per cent poorer mean? Well at the moment the UK gross domestic product, or national income, is just a little over £1,900 billion per year. So 10 per cent poorer means £190 billion worse off. Given that there are just over 30 million homes in the UK, it means that on average UK families will be £6,330 per year worse off.

If we leave the EU but stayed in the customs union and the single market, I believe the impact on our wealth would be much less, around four to five per cent worse off.

The ballot paper for the referendum asked us if we wanted to stay or leave the European Union, it didn't say anything about the customs union or the single market.

I accept that we voted to leave the EU, but I do not accept the things added on afterwards.

We joined the customs union in 1958, before we joined the Common Market. Turkey and a few other countries who are not in the EU are members, it means we have no paperwork moving goods. It has worked well for 60 years, has been good for business.

I realise what I am saying isn't necessarily popular, for many years being a eurosceptic has been the fashionable thing to do.

But I say we should be just as sceptical about Whitehall and London-based politicians. They keep their big pensions, give tax cuts to the top one per cent of rich people, and don’t do a lot for the regions and the average person or family.

We need to be honest and balanced about being sceptical.