Proof that life can be better after next March
Switzerland is growing at a rapid 3.4pc. Norway is expanding at 2.2pc this year, the fastest of the Scandi economies. Iceland is at 3pc-plus this year as it gets back to its turbo-charged performance before the financial crash. What do they have in common? They are all in Europe, but outside the EU.
Meanwhile, Italy is heading back into recession. France is stagnating again, and even Germany is slowing down with yet another plunge in factory orders this week. As the final quarter of the year starts, it is clear that the non-eu Europe will grow faster than the EU.
We keep being told that membership of the Union is crucial to the economy, and that output will collapse if we don’t do a deal on leaving. And yet the evidence remains shockingly thin – the other countries outside seem to keep doing just fine.
On the surface, you wouldn’t expect there to be much difference between German and Swiss growth rates. They are both high-end manufacturing, export-oriented, highly skilled, wealthy economies in the heart of Europe. In fact, with their punishingly high currency you’d probably expect the Swiss to be doing a bit worse than the Germans. But that is not the way it is working out. This week, Switzerland reported its fastest quarterly growth rate in eight years, led by a rising manufacturing sector. Across the border, however, the picture is very different. Germany this week reported a drop in industrial output, a fall in exports and slowing wage growth, down to just 2pc a year. It is a striking contrast. Something similar is going on in Scandinavia, where Norway’s rate of expansion is forecast to overtake Sweden by the end of this year.
Iceland is too small to be much of an example of anything, and its economy is about as stable as a toddler after three cans of Coke, but it is back to its old roaring self after the collapse it witnessed in 2008 and 2009. Growth is now a robust 3.6pc, and local analysts are starting to fret that the krona is too strong. Given that the UK is now in a strange half-in/half-out limbo, you could arguably add us to the list of non-eu countries – and it is noticeable that the UK’S secondquarter expansion of 0.4pc was ahead of the 0.3pc recorded for the eurozone.
It is obvious that the Western European countries in and out of the EU are all very similar. They all face the headwinds of looming trade wars, increasing turmoil in the emerging markets, a rising dollar and a slowdown in global trade. And they all have roughly the same fundamentals of high welfare spending, highish taxes, strict labour market regulations and ageing demographics.
We are told that membership of the European Union is vital to the survival of the British economy. But there is surprisingly little evidence for that. Economies seem to grow faster outside the EU. Why is that? True, they all have trade or association agreements with Brussels which means they have to comply with many of the rules and regulations set from the centre. But they also have more flexibility, in control of their own currency, labour laws or competition rules, and that means they can adjust more quickly. And they can usually maintain one or two key policies that keep their competitiveness intact. Meanwhile, the EU keeps doubling down on a high-tax, high-regulation, anti-business model – just take a look at its constant assaults on the technology sector, or the ramping up of employment protection. The single market has some advantages, but they are easily trumped by the flexibility the outsiders enjoy. The net result? They grow faster – and are likely to keep doing so.
The lesson for the UK is clear. Getting out will be traumatic. With seven months until our departure, we don’t know whether we will have a deal, and if we do what the terms may be and how much EU law we will have to stick with. Exporters have no idea what tariffs they may face, and companies don’t know how many foreign workers they will be able to hire. It is chaotic, and will get worse as March approaches. But once it is done, the UK will do just fine. Switzerland and Norway are growing faster than their neighbours, and there is no reason why, after a year or two of disruption, we shouldn’t as well.
‘It is chaotic, and will get worse. But once it is done, the UK will do just fine’