It’s been a tough few years for Project Fear. But I suspect it may only get worse. At least, that’s what the Office for Budget Responsibility predicted. The last remaining record is forecast to be broken by the UK in 2022.
But let’s get some context first…
The doom mongering about Brexit was of course extraordinary.
The Guardian had the best cluster of predictions:
Brexit would prompt stock market and house price crash, says IMF
Christine Lagarde backs Bank of England governor’s claim that Britain could enter recession after vote to leave EU. – (13 May 2016)
The UK government had a similar line with its Treasury analysis…
This paper focuses on the immediate economic impact of a vote to leave and the two years that follow.
… a vote to leave would represent an immediate and profound shock to our economy. That shock would push our economy into a recession and lead to an increase in unemployment of around 500,000, GDP would be 3.6% smaller, average real wages would be lower… – (23 May 2016)
What happened instead was better than even ardent Brexiteers could’ve wished for.
There was no recession, to put it mildly.
Unemployment hit long-term record lows, as the Guardian was ecstatic to point out in March 2019:
UK unemployment falls to 44-year low despite Brexit fears
Employers’ hiring reduces jobless rate to 3.9%, the lowest since the start of 1975
UK unemployment has dropped to the lowest level in more than 44 years despite mounting fears over Brexit, as employers across the country ramped up hiring at the fastest rate in more than three years.
Wages continued to grow too. As did house prices. The stock market took a while to hit an all-time high post referendum, but the FTSE 100 eventually hit that point in May 2018.
One after the other, the UK economy didn’t just disprove the gloomy forecasts. It set records instead!
But that wasn’t the end of the record-setting good news – precisely the opposite of establishment predictions on each count.
As Boris Johnson pointed to 2018 foreign investment stock figures when he said, “we have record foreign direct investment of £1.3 trillion – more than any other country in the EU.” Third only to Hong Kong and the US.
The Guardian also discovered that “Britain recorded the first monthly trade surplus in more than eight years in June” of 2019. Thanks to Brexit.
The most remarkable thing is that the UK achieved all this, despite Brexit, without even cutting interest rates to zero, the levels used in the eurozone, Switzerland, Scandinavian nations and other comparable places to spur on the economy…
In fact, the complete lack of a crisis forced the Bank of England to reverse its overzealous emergency rate cut and hike rates in November 2017 for the first time in a decade! That’s how good the economic conditions ended up being.
Inflation finally returning to the Bank of England’s target in the months after the referendum too.
In the face of this record setting run, the Brexit sceptics countered that Brexit hadn’t happened yet. So the economic catastrophe was yet to come.
Having been disproven, they simply made new forecasts of doom…
Well, things are about to get a whole lot worse for the Brexit sceptics… I’m talking about another humiliation. Perhaps the last one the economy can dish up.
Britain’s highest ever recorded annual GDP growth rate was 6.5%, in 1973. That’s also the year we joined the European Economic Community. After which things went rather badly downhill…
A series of recessions, recoveries and stagflation were followed by economic growth not breaking above 4% per year for many years.
But in 2021, economic growth is finally expected to break above 4% with a 4.5% boom. Not bad, but not exactly record setting, is it?
For that to happen, we need Brexit to really take hold.
For 2022, the government is forecasting an all-time record GDP growth rate of 6.6%!
Despite Brexit!
Can you imagine if the UK economy posted an all-time economic growth record the year after Brexit was implemented?
What would Project Fear say then?
I’m sure they’ll come up with something…
Of course, the real reason for the economic boom has nothing to do with Brexit. (Yet.)
It comes after the biggest economic contraction since the Great Frost of 1709, when the Thames froze over, a bit like it did again recently at Teddington Lock.
The 9.9% drop in GDP for 2020 is horrifying. As is the lockdown that caused it.
Meanwhile, Sweden’s economy was forecast in December to crash 2.9% in 2020 thanks to their lack of a lockdown. That’s with a death rate lower than many European countries which opted for lockdowns…
Still, it’s dishonest to claim that Brexit is responsible for the economic boom which will supposedly begin in 2021 and take off in 2022. It’s just that the timing is a funny coincidence for Project Fear’s forecasts of doom post-Brexit.
Now I doubt the government’s forecasts will be proven correct this time either, to be honest.
But that’s the underlying point here.
The fact that the Project Fear has copped it so incredibly badly these past few years is of course amusing to Brexiteers. But the worm could just as easily have turned the other way.
If the economy had turned down instead of up in the way that it did, for reasons unrelated to Brexit, you can imagine the Project Fear headlines…
The fact that so many records were broken is not a vindication of Brexit. Nor does it vanquish Project Fear. It just shows that economic forecasts of the type relied on by Project Fear are clueless. And economic results are impacted by such a myriad of factors that it’s incredibly difficult to tease out specific ones such as the impact of Brexit.
The results we’ve seen and will see from the UK economy should undermine the overconfident and those presenting overly detailed analysis and claims. Be they Brexiteers or Remainers. But it won’t.
The good news is that a lot of us will listen less to such people. The bad news is that we’ll be branded as unscientific and sceptics as a result…
You’re better of spending your time looking for investment strategies that are independent from the circus of attributing broad economic outcomes to specific causes. Like this one.
Nick Hubble
Editor, Fortune & Freedom
