The City must prepare for an £135bn per year Brexit boost

IN 1553, London merchants funded a naval expedition to China via the North East passage. It got trapped in the ice in Russia’s White Sea and was forced to travel overland to Moscow where Ivan the Terrible granted it exclusive trading rights.

Monday 21 August 2017 1:03am 

David Blake

Professor David Blake is a member of Economists for Free Trade.

Source: Getty

The group returned to London to set up the Muscovy Company. This became the model for future trading ventures in Africa, the Levant, Canada, the East Indies, Virginia and the Caribbean. In less than 100 years, the UK became the most outward trading nation in the world.

London was transformed from a small European trading centre into a global financial hub.

It is this spirit of global free trade that the UK can now rediscover by combining the exit from the EU’s restrictive single market and customs union with opening up our economy to the positive effects of full competition – unlocking a Brexit boost of up to £135bn a year. This dividend has been calculated by Economists for Free Trade – a 16-strong group of leading economists, including myself – who chart the course from Project Fear to Project Prosperity in a new report to be published this autumn.

Read more: Pro-Brexit economists say leaving EU will add £135bn to economy

Leaving the EU will enable the City of London to reclaim its mantle as the world’s financial powerhouse. It will give the UK the freedom to design a more attractive regulatory framework based on global standards. Not only would such a model attract business and liquidity to the UK, it would liberate financial services from the burden and increasing uncertainty of EU regulation.

In particular, we would remove the most unnecessarily onerous requirements of EU laws; move away from the EU’s process-focused approach to one based on outcomes; re-draft laws in common law style, which would bring far greater certainty and clarity compared with the “purposive” method of interpretation in the EU; move away from poor ECJ decision-making in the financial services context, which is insufficiently focused on fact-based analysis; and remove laws designed to provide for the EU Single Market.

Hence why it would make no sense to stick with our current high tax, high spend and high regulation format. This is a point made by Economists for Free Trade, who warn that Philip Hammond is unwise to rule out the UK’s ability to adapt our tax and regulatory regime to suit our new position as a champion of global free trade.

Nor should we be concerned about Europe “stealing” our financial services industry. The banking, asset management and insurance sectors contribute eight per cent to the UK’s Gross Value Added and 75 per cent of the UK’s trade surplus in services. The UK has the world’s fourth largest banking sector – with 17 per cent of all international bank lending, more than any other centre – the third largest insurance sector, and is second for assets under management at £6.2 trillion. The UK’s financial services industry is of great importance to the EU, with around 40 per cent of UK net financial services exports going to the EU: 60 per cent of the EU’s capital markets business is conducted through London, and UK banks are the biggest source of cross-border lending to EU banks and corporates with more than £1.1 trillion of loans outstanding.

It is as ridiculous to believe that the City of London will move to Paris or Frankfurt after Brexit as it is to believe that the French wine industry or the German car industry will move to the UK.

Brexit is a golden opportunity for Britain.

It is also a golden opportunity for the City of London to escape the clutches of the EU as a global financial hub and take the lead in the new digital revolutions of fintech and blockchain.

http://www.cityam.com/270541/city-must-prepare-135bn-per-year-brexit-boost

This group of pro-Brexit economists says leaving the EU will add £135bn to economy

A group of economists who backed Brexit have predicted that leaving Europe could add £135bn a year to Britain's economy.

Economists for Free Trade (EFT), formerly known as Economists for Brexit, calculate that a so-called hard Brexit would lead to a surge in national output worth around £5,000 a year for every household on average.

Sunday 20 August 2017 9:11am

Economists say dropping tariffs could force a trade deal with the EU (Source: Getty)

In the new report due to be released this Autumn, they say that output surge should be accompanied by an eight per cent fall in prices, the equivalent of a £40 a week boost.

Read more: Ministers say UK will make "sufficient progress" in Brexit talks by October

"Hard Brexit is good for the UK economically while soft Brexit leaves us as badly off as before…hard is economically much superior to soft," said Patrick Minford, professor of economics at Cardiff University and a former adviser to the Treasury, arguing that the UK should pursue global trade deals outside of Europe.

“Backers of soft Brexit say it would preserve jobs, but what they really mean is that it would preserve existing jobs by stopping competition from home and abroad. As every schoolboy knows and every politician ought to know, this aborting of competition reduces jobs in the long run…Competition increases productivity and so employment because higher wages paid for by higher productivity makes work more attractive. Competition also increases our general welfare because we are producing more.”

The group, which also includes Roger Bootle of Capital Economics and professor of economics at Cass Business School, David Blake, also believes the UK should eliminate all trade barriers and tariffs if new trade agreements can't be made with the EU and other countries to benefit from such gains

“This is unilateral free trade (UFT) whereby we simply abolish our trade barriers without asking others to do the same. The most famous example of this was in 1846 when Sir Robert Peel abolished the Corn Laws, greatly reducing the price of food and helping to stimulate the Industrial Revolution," said Minford.

Read more: This top economist says two years is the perfect Brexit transition time

Such a move would put pressure on the EU to agree a deal with the UK "flooded" with less expensive goods from non-EU countries.

Minford said it would be "A strong incentive for the EU to do a trade deal with us – which is what we want politically".

"This is the origin of the political soundbite – ‘No deal is better than a bad deal…Free trade acts as ‘the club in the closet’ to bring the EU to a proper trade agreement with us.”

However, anti-Brexit group Open Britain dubbed such a plan "absurd".

“Unilaterally scrapping our tariffs without achieving similar reductions in the tariff rates of other countries would see Britain swamped with imports, leaving our manufacturers and farmers unable to compete. The levels of bankruptcy and unemployment, especially in industry and agriculture, would sky-rocket," said Labour MP Alison McGovern.

And other economists were not convinced by his arguements.

"One thing that professor Minford gets right is that trade boosts our living standards and the economy standards. But he ignores decades of evidence on how trade actually works, and on the benefits of trade agreements," said Dr Monique Ebell, associate research director at the National Institute of Economic and Social Research.

http://www.cityam.com/270525/group-pro-brexit-economists-says-leaving-eu-add-135bn