With Britain finally out of the European Union, will the promises of the Brexiteers be fulfilled? — Are the sunny uplands ahead? Maybe, but more like an Icelandic, not a mediterranean summer, i.e. cold.
If we just look at the economy, it doesn’t look all that good.
Starting with GDP, when we were voted for Brexit our GDP was 21.6% of the European GDP and today it is only 19.9%. That means our GDP would have been £183 billion higher if we had stayed in the same relative place compared to the EU.
I can hear the retort. What about Covid? Doesn’t that explain 2020? Yes, but it also affects Europe, and this is relative. If I assume Covid affects UK’s GDP by the same amount as Europe’s (reasonable as UK has quite similar Covid stats), it is quite reasonable to blame Brexit for the relative shortfall.
So, the Brexit shortfall is £183 billion.
And if we look at the stock market, the FT100 is up by 3.2% since the day before the Brexit vote, while the S&P-500 is up by 80.1% and the DAX up by 36.2%.
The rational investment strategy clearly seems to be to put ones money anywhere but in FT100. Now, the FT100 is not the British economy. So, is there a case for investing in Britain than than somewhere else?
When I calculate the British GDP relative to the European Union’s GDP, we just about peaked around the Brexit vote and it has been declining since.
Our GDP ranking remains the same, with 10 European countries ahead.
I don’t have every stock market in Europe in the figure below, but do have all of the important ones. And, FT100 has performed abysmally. For more on stock markets see my Covid-19 page.
In all the disappointments about Brexit, one stands out — the inability of the libertarian Brexiteers to outline a coherent vision of what Brexit will accomplish. They used to see rational economic management as as a virtue, now what matters is culture. For more see “the Brexit culture war”.