Brexit is a success or failure?

Mr. Rishi Sunak, UK Prime Minister: As chancellor and prime minister, I am delivering the benefits of Brexit as opposed to talking about it.’ Photograph: Alamy/Allstar

In answering this question, we need to remember that the bulk of the Conservative Party – and particularly those in the government - said that they did not want to leave the EU in the 2016 referendum. The Treasury even produced a very long document to show it would be an economic disaster and, so far, what evidence we have suggests that it has been worse! Does this make Brexit a success for the Conservatives because the vast bulk of the Party warned it would be a disaster – and have been proven correct? Or a failure because the Conservatives pushed Brexit through on such poor terms that the UK economy never stood a chance?

Interestingly, there is one key tenant of the Brexit campaign that has been kept; control of the UK’s borders. Indeed, many would rightly argue that this was the overarching reason for Brexit. But while it has been delivered it has not led to a sharp fall in immigration, as many at the time suggested. Instead, immigration has surged and new data is expected to show that the increase has extended even further.

However, there is some confusion here. For while many might have seen border control as a way to reduce immigration, the original Brexit promise was to allow the UK to shape the type of immigration that occurred. Ostensibly, supporters of Brexit wanted to reduce the influx of low-skilled, low paid workers, often from EU countries, but allow inflows of higher-skilled, and hence higher paid workers, many of whom come from outside the EU. Evidence suggests that this twist away from low-skill to high-skill and from the EU to non-EU countries has indeed happened.

The only problem is that the Conservative leadership has rather muddied the waters by setting targets or aspirations for reduced immigration which, of course, it has persistently failed to achieve. As a result, success is seen by many as failure; or should that be that failure is viewed as a success? Whatever it is, the net result has been soaring immigration although we should not forget that a notable part of this has reflected inflows from Ukraine because of the war and inflows from Hong Kong after the UK offered residents a route to British citizenship.

"Why do we mention all this? We do so in the context of more research (the latest from former Fed Chair Bernanke and former IMF Chief Economist Oliver Blanchard) about inflation persistence and, in particular, the role that tight labour markets are playing. For rather than inflation being primarily a supply driven problem in the goods sector, the persistence of inflation is arising because labour markets are still so tight. This is notable in the US, which is the focus of Bernanke and Blanchard’s work, but it is also prevalent elsewhere, including the UK", said Mr. Steve Barrow, Head of Standard Bank G10 Strategy.

The UK government’s argument is that control over immigration allows the authorities to note those sectors where labour supply is short and then go and source potential migrant workers from different parts of the world. It is all part of the strategy to have a high wage, highly productive economy; the problem at the moment is that the UK has the high wages but not the high productivity. This may come in time, but even if Brexit has been successful in allowing the UK to target the most appropriate supply of foreign labour, it may be hard to see those benefits in time to really make a dent in the wage-push inflation which is a significant part of the problem in the UK right now.

In short, it is like many other aspects of Brexit, which is that “success” may become more apparent in the long haul, but not now and, as long as that’s the case the Conservative government may find it tough to extend its long tenure in office beyond the next election.