The economic rebirth that’s good for Brexit

All around the world the signs are encouraging, which should mean a better deal for Britain

Amid all the interminable and ultimately unanswerable debate about how good or bad Brexit might be for the UK economy, something rather important is being quite widely missed. It is this: there are much bigger forces at work in shaping our island economy than the negotiations on Britain’s future relationship with the European Union.

These forces are the great oceanic currents of the global economy. As one of the world’s most open economies, the UK is unavoidably nearly always far more beholden to such forces than almost anything else. When things are bad externally, they tend to be pretty grim here too; by the same token, when the global economy is doing well, that same buoyancy will also be mirrored on these shores.

It would take almost unimaginable, Venezuelan-style, economic mismanagement for the UK to be in recession when all around are growing like topsy. So, momentous though the process of leaving the European Union undoubtedly is, these external influences are considerably more likely to determine the success or otherwise of the UK economy over the next two years and beyond than the diplomatic wranglings over the terms of Brexit.

That’s good, because as luck would have it, the global economy is perking up across the board. We should, of course, beware of false dawns. There have been many of them since the dark days of the banking crisis nearly a decade ago. It is not yet clear the wounds have entirely healed.

There is, moreover, still much that could go wrong. China might yet keel over under the growing weight of its own debts, the eurozone crisis could all too easily reignite, or Donald Trump could be as good as his word, and destructively retreat behind high, protectionist walls.

Yet uncertainty is always with us, and if anything, the known risks today seem to be rather less threatening than for quite some time. Even the political risk of European populism seems to be in retreat. Unusually, moreover, today’s growth spurt is not confined to a single region. There is a confluence of economic revival. I’ve recently returned from the Far East, where the economy seems once more to be approaching near boom conditions.

The major global trading hubs of Taiwan, Shanghai and Singapore are positively buzzing with excitement and activity. International trade, seemingly permanently becalmed by the catastrophe of the Lehman crisis, is once more in the ascendant. Similarly in the US, where despite the apparently chaotic and ineffectual nature of the Trump presidency, a spirit of economic optimism not seen in years seems to be taking hold. Keynes’s famous “animal spirits” have returned with a vengeance.

Always a year or two behind the US in the economic cycle, Europe too seems slowly to be raising itself from its sick bed, buoyed by the recovery in the wider global economy. We have grown used to unsynchronised economic progress, of one region collapsing down even as another tries to struggle back up. Yet, today, the world economy seems to be firing on all cylinders in a way not seen since the late Nineties.

This economic rebirth ought to prove supportive of Brexit in two ways, assuming it holds. First, it should help mitigate any economically depressing side effects from Brexit uncertainties. This in turn will make the politics of Brexit easier, cauterising business and economic opposition to the process. But perhaps more important, it ought to help Europe feel more at ease with itself, and therefore more rational and magnanimous in the way it deals with Britain’s departure.

The EU has been fire-fighting on multiple fronts for an awfully long time now. This is easily forgotten in the already developing acrimony of the Brexit divorce courts. First there was the eurozone debt meltdown, which proved almost existential. No sooner had the policy-makers calmed the financial flames than they were hit by the migrant crisis.

Brexit was the final kick in the proverbials. A potentially dangerous, back-against-the-wall way of thinking has taken hold in the EU hierarchy, a desire for revenge and punishment which although not rational is all too easily explained by the series of crushing blows dealt to European hubris and vanity.

It’s of the utmost importance that this siege mentality is not allowed to gain the upper hand in forthcoming negotiations. A baited bear is not easily tamed, which is why an adversarial approach to the coming negotiations is almost bound to fail.

There is absolutely no reason why Britain should not enjoy a similar relationship with the EU as Canada does with the US, highly integrated on many levels, but separate sovereign nations with their own laws and mutually recognised standards.

This is what the talks must aim for, and with goodwill on both sides, it’s eminently achievable. That goodwill is going to be much more likely in a growing economy. We can but hope that the present sweet spot persists.