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UK Battered by Brexit – Will It Ever Pay Off?

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UK Battered by Brexit

Will It Ever Pay Off?

Before the United Kingdom’s breakup with the European Union, predictions varied widely on how the nation would fare after the split. The debate continues three years later.

Learn the why behind the headlines.

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On June 23, 2016, Britain voted to leave the European Union. Yet three years after its departure, the nation is yet to benefit from the Brexit dividend many envisioned for its economy as it lags its peers on multiple fronts, including trade and investment.

Britain formally exited the EU on January 31, 2020, though it remained in the bloc’s single market and customs union for 11 more months. On that day, then-Prime Minister Boris Johnson said the country could now finally fulfill its potential and that he hoped Britons would grow in confidence with each passing month.

So far, the opposite has happened—a range of indicators show underperformance compared with other economies. Opinion polls show Britons who regret leaving the EU increasingly outnumber those who do not. A survey published recently by news website UnHerd showed this was now the case in all but three of 632 parliamentary constituencies analyzed. This is a stunning turnaround from the joyous optimism many displayed following the Brexit vote in 2016.

However, the government, now led by Brexit-supporting Prime Minister Rishi Sunak, says Britain is prospering with newfound freedoms. Finance minister Jeremy Hunt challenged the talk of decline and said recently that Brexit is offering a brighter future with room for measures that will attract investment in areas such as the green economy and tech.

Many economists say leaving the EU is not the sole cause of Britain’s woes—the country was hit hard by the coronavirus pandemic and a surge in gas prices after Russia’s invasion of Ukraine—but it is a factor that can help explain recent underperformance.

“It’s been more than a slow burn. It’s been a serious reduction in economic performance,” said John Springford, deputy director at the Centre for European Reform think tank. “If you impose barriers to trade, investment and migration with your biggest trading partner [the EU], then you’re going to have quite a big hit to trade volumes, and to investment and to GDP,” he said, pointing to a string of dismal economic data.

Britain was the only Group of Seven advanced economy yet to regain its pre-pandemic size of late 2019 at the end of September last year, the most recent period covered by data.

In late January, the International Monetary Fund said it expected Britain’s economy to shrink by 0.6 percent this year, in contrast to predictions of growth across the rest of the G7.

Mr. Springford estimated that Brexit reduced Britain’s economic output compared with what it would have been without leaving the EU by around 5.5 percent as of mid-2022, based on a “doppelganger” model in which an algorithm selects countries whose economic performance closely matched pre-Brexit Britain.

The government’s own forecasting organization, the Office for Budget Responsibility, and the Bank of England also judge there to be a long-running net cost to leaving the EU.

Some economists disagree with the consensus. Brexit-supporting economist Gerard Lyons, an adviser to online wealth management platform NetWealth who advised Boris Johnson during his years as the mayor of London, said it was wrong to blame Britain’s problems on Brexit.

“Our problems pre-date Brexit,” Mr. Lyons said, pointing to chronically low rates of investment in Britain. “Achieving the benefits of Brexit very much depends on delivering…a growth plan—how you can use your levers post-Brexit.”

Mr. Lyons criticized the doppelganger method of analysis on the basis that some smaller countries selected by the models were inappropriate comparators for a large economy like Britain.

Trading Blows

Trade and investment data point to other Brexit problems. Exports, especially in goods, have disappointed over the last three years, despite high hopes for a “Global Britain” rebalancing of the economy post-Brexit. Total exports, including services, have grown by less than those of any other G7 country since late 2019.

Boris Glass, senior economist at ratings agency S&P Global, said increased red tape in UK-EU trade had especially damaged the competitiveness of smaller British manufacturers since they have fewer resources to deal with it.

“It’s worth noting that the UK has more small exporters than for example, France or Germany. So in that respect they are disadvantaged,” Mr. Glass said. “If you are an exporter with 20 employees, then the burden of filling out these forms is very costly. Some of them can’t compete at all.”

Business investment, too, has grown by less since the June 2016 Brexit referendum than in the United States, France or Germany, according to a Reuters analysis of data from the Organization of Economic Cooperation and Development.

Some pro-Brexit economists say such statistics ignore the fact that British corporate investment was unusually strong in the years leading up to mid-2016 and was bound to slow. But business survey evidence overwhelmingly points to Brexit as a factor behind weak investment in recent years.

“It’s concerning that there doesn’t seem to be any kind of pickup in investment. And I think, in order for us to have a durable recovery from the Brexit shock, then we’ve got to see that rise,” Mr. Springford said.

While Britain still boasts higher rates of employment and lower unemployment than most EU countries, there are signs that Brexit may have impacted the labor market too. Business groups want the government to relax its post-Brexit immigration rules as firms are struggling to find workers, something the Bank of England fears is stoking inflationary pressures. And, unlike most of its G7 peers, Britain’s employment rate has yet to recover to its pre-pandemic level.

The UK and the EU recently announced that they have struck a deal to resolve a dispute over Northern Ireland trade that has vexed relations since the UK left the bloc. The agreement will ease customs checks and other hurdles for goods moving to Northern Ireland from the rest of the UK that were imposed after Brexit to maintain an open border between the north and its EU neighbor, the Republic of Ireland.

The deal, dubbed the “Windsor Framework,” was hailed by London and Brussels as a breakthrough. But Northern Ireland’s British unionist politicians have yet to give it their blessing. Their support is key to restoring Northern Ireland’s semi-autonomous government, which has been toppled by the trade feud, leaving 1.9 million people without a functioning administration. Time will tell whether this deal is truly the breakthrough many are hoping for.

With all the problems Brexit is causing, why did Britain leave in the first place?

A Look Back

Imagine the UK’s relationship with the EU pre-Brexit as the scenario of a married man and woman stranded on a desert island. Although the relationship had long become strained, they both realize for a time that their situation is desperate and, unless things change, their future is dim. They must work together—they have no other choice. Their very survival depends on it.

Now shift to the history of Britain and Europe. Two world wars left the European continent devastated. With Adolf Hitler dead, Nazi Germany smoldering in ruins, and the Soviet Union poised to emerge as a world superpower, the nations of Europe concluded that they must unite—or else.

Though the marriage seemed to work for a little while, their path forward was fraught with roadblocks, bumps and chaotic turns that seemed to detour into uncertainty. Nonetheless, each partner knew the bed they had made with each other.

As with most rocky marriages, however, divorce was inevitable. Severing the bond eventually appeared to be a better option than continuing the status quo. There were too many disagreements and misunderstandings. The common proverb “the grass is always greener on the other side of the fence” became all too real when British voters became fed up with Europe’s liberal leaning toward mass immigration and its financial mismanagement when dealing with fiscally irresponsible countries like Greece. To Britain, Europe had all too often crossed a line that had been drawn in the sand.

With the advent of Brexit, it became clear this marriage of convenience was over and there was no going back.

Many asked: Where did the marriage go wrong? Had Britain grown tired of European technocrats overruling British lawmakers and telling the UK what laws Europe would allow to go unchecked? Was it Europe’s insistence that the UK accept any and all immigrants into its fold, regardless of UK immigration laws or how it would affect Britain economically, socially and politically? Was it the European Union’s growing and unrelenting pressure for Britain to scrap the British pound in favor of the euro? Was it the famed “isolated island nation” mindset that Britain has long been accused of holding onto, therefore keeping it separate socially, culturally and mentally from the rest of Europe?

Yet we must pull back and examine on a foundational level why such radically different partners could never ultimately coexist.

The island nation of the British peoples has always had a mind of its own. After all, at one time it ruled or directly influenced the better part of the Earth, giving rise to the once-popular saying, “The sun never sets on the British Empire.” And for good reason: At its zenith, the British Empire stretched across the planet, including England, Wales, Scotland, Ireland, Canada, the original 13 colonies of America, Bermuda, Jamaica, South Africa, Egypt, Sudan, Nigeria, Sierra Leone, India, Iraq, Burma (today’s Myanmar), Australia, New Zealand and Fiji, to name a few.

The problematic relationship between Britain and the EU and its resulting financial struggles can be attributed to one thing: The mindset of the British peoples is fundamentally different from that of the other nations in the EU.

Over the decades, Britain had grown used to ruling on its own and charting its own course into the future. Quite naturally, it bristled whenever bureaucrats approved EU restrictions over British laws. The result of the Brexit vote and subsequent split further confirmed this. Yet there is an even deeper reason for this…

Look Back Further

The world remains in blissful ignorance of the real origins of the world’s greatest nations, Britain and the United States. The reason Britain could not coexist with the EU has to do with its real identity—revealed in God’s Word. People in Britain and America, along with Canada, Australia, New Zealand, and other English-speaking nations, cannot put in proper perspective what is happening to their nations because they do not know how to identify their origins in Scripture.

No wonder God lamented in the book of Isaiah: “The ox knows his owner, and the ass his master’s crib: but Israel does not know, My people do not consider” (1:3).

Consider the following excerpt from the book America and Britain in Prophecy, written by this magazine’s editor-in-chief, David C. Pack: “Many have mistakenly thought, ‘The Jews are God’s chosen people.’ This is only partially true, and it denies the tremendous truth about why the United States and Britain rose to such unprecedented prominence and power.

“God’s Holy Word clearly reveals that His entire plan of salvation is inseparable from, and relates to, the nation of Israel. Notice: ‘Who are Israelites; to whom pertains the adoption, and the glory, and the covenants, and the giving of the law, and the service of God, and the promises…’ (Rom. 9:4).

“The Jews never fulfilled the national greatness prophesied—and promised—to come on the modern descendants of ancient Israel. Have you wondered why?

“Now ask yourself: Why is it then that the English-speaking peoples most profess to believe in the Bible and the God it describes? Why is it that all peoples of the world professing worship of the God of the Bible, were at one time taught by these English-speaking, Anglo-Saxon people? Why is it that these same people have done more to preserve the Bible than any other? Is it not also strange that these nations, and not the Jews, have proliferated the Bible around the world far more than all other nations put together?

“The Jews were prophesied to become scattered, and were never foretold to achieve national greatness. It is a far different story for the United States and British Commonwealth! It has been said that ‘Never in history has any country or commonwealth been so blessed’ and that because of this blessing, ‘Never have so few produced so much to feed so many for so little.’ How true of these nations—but this has never been true of the Jews!”

“Everything is at stake for the Anglo-Saxon peoples—literally. Cataclysmic prophecies must yet be fulfilled—and these will soon begin to crash upon unsuspecting populations. You can, indeed you must, understand all that lies ahead for hundreds of millions.

“The ultimate future of the American and British peoples is astounding, with their greatest period of prosperity and world influence yet ahead. But this time will not come as their leaders, planners and thinkers might hope.”

“When related Bible passages are placed together in clear and concise form—the Bible is a jigsaw puzzle, and it must be permitted to interpret itself—the prophecies about America and Britain (and certain other Western countries) are not difficult to understand. In fact, you will wonder why so few have been able to comprehend them.”

The Bible is so much more than a collection of seemingly unrelated stories and enigmatic parables and dos and don’ts. It is man’s Instruction Manual from his Creator, which has been recorded through the ages by divinely inspired servants. The Bible explains who and what we are, why we exist, what is life’s ultimate purpose—and how we can achieve it.

The reason for Britain’s mindset being so different from other European nations can be understood by grasping its real origin as a nation and what God promised it would become.

The Bible has much more to say about the roots of the British and American peoples and their ultimate destiny. God’s Word identifies their forefathers, as well as those of Canada, Australia, New Zealand, France, the Netherlands and certain other Western European nations.

There are awe-inspiring prophecies regarding Britain and America that have yet to be fulfilled. Roughly one-third of the Bible is prophecy—history written in advance.

If you would like to learn more about America and Britain’s biblical origins—why they were such uniquely blessed and prosperous peoples—and what lies just ahead for them—read America and Britain in Prophecy.

This article contains information from Reuters.

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