Brexit at 10: What comes next? With Anand Menon

Episode Summary

Executive Summary: The episode argues that Brexit’s economic damage has been real but slower and harder to measure than early warnings suggested. Anand Menon says long-run forecasts were broadly right, but the biggest effects are via trade barriers, uncertainty, distraction, and weaker political focus. He is skeptical of some large GDP-loss estimates, favors pragmatism over a rush to reset relations, and sees rejoin debates as politically possible but deeply contingent.

Main Topics: How damaging Brexit has been economically (Priority: 5/5): Menon rates Brexit as significantly harmful to the UK economy, though not as catastrophic as the most extreme predictions. He argues the long-term forecasts were broadly in the right range, while the short-term Treasury recession scenario was too immediate and didn’t account for consumer resilience and policy support. Why economic forecasts proved difficult (Priority: 5/5): The discussion emphasizes that Brexit’s impact is hard to isolate because of COVID, the war in Ukraine, Gulf instability, changing trade data collection, and weak services data. Menon argues that precise point estimates should be treated cautiously and ideally as ranges. Trade, uncertainty, and distraction effects (Priority: 5/5): The conversation explores three main channels of Brexit damage: higher trade barriers, uncertainty that depressed investment and productivity, and a distraction effect that consumed elite political attention. Menon also links political distraction to missed opportunities on levelling up and inequality. Reset negotiations with the EU (Priority: 4/5): Menon explains that the current UK-EU reset is constrained by Brexit red lines: no customs union, no single market, no free movement. He says negotiations over agriculture, emissions trading, and electricity market participation are slow, and the EU is not in a hurry to accommodate the UK. Political economy of trade deals and customs union (Priority: 4/5): Re-entering a customs union would have limited economic upside but major political and diplomatic consequences, including potentially scrapping trade deals with countries like Australia, Japan, and New Zealand. Menon says control and sovereignty remain central obstacles. Rejoin politics and public opinion (Priority: 4/5): Polling suggests some appetite for rejoin and for another referendum, but public views become less supportive once trade-offs are made explicit. Menon argues any rejoin campaign would need to tie the issue to a broader public concern such as immigration or living standards. UK-EU security cooperation (Priority: 3/5): Menon thinks security cooperation is a more urgent and realistic area for UK-EU collaboration than economics. He criticizes the collapse of the SAFE defense scheme and argues the UK should be included in European security arrangements.

Key Arguments: Brexit has clearly harmed the UK economy, but the damage has emerged more slowly than immediate post-referendum forecasts implied. The best long-run economic models were broadly correct about direction and magnitude, even if short-term recession predictions were too dramatic. Large point estimates such as a 6% to 8% GDP-per-person loss are likely overstated because they assume an unrealistically strong counterfactual for UK performance outside Brexit. Measuring Brexit is exceptionally hard because multiple shocks occurred simultaneously, including COVID, the Ukraine war, and data-quality issues. Services trade has been more resilient than expected, partly because COVID normalized virtual work and reduced the need for travel and visas. Brexit hurt firms that trade more with the EU, which is one of the more persuasive pieces of firm-level evidence. The distraction of Brexit from governance may have been almost as important as direct trade effects, especially in relation to levelling up and policy attention. The current UK government’s reset is constrained by self-imposed red lines that prevent major economic reintegration. The EU sees the current trade arrangement as acceptable and is in no hurry to make concessions. A customs union would yield only modest economic gains, mostly by removing rules-of-origin paperwork, while creating serious sovereignty and trade-deal constraints. A future rejoin campaign would need to confront trade-offs honestly, because membership costs and obligations would be clearer than in the original leave campaign. Immigration remains central to British politics, and any attempt to reopen the Europe question will likely have to address it directly. Security is the area where pragmatic UK-EU cooperation is most feasible and most urgent, given immediate geopolitical threats.

Data Points: UK Treasury short-term forecast (May 2016): 500,000 more unemployed - Prediction of the immediate labor-market impact of leaving the EU. UK Treasury short-term forecast (May 2016): GDP 3.6% smaller - Estimated economic output loss from a vote to leave. UK Treasury short-term forecast (May 2016): Recession / inflation higher / sterling weaker / house prices hit / public borrowing rise - Predicted macroeconomic consequences of leaving the EU. GDP per person loss estimate: 6% to 8% - A cited paper’s estimate of Brexit’s effect on UK GDP per person; Menon is skeptical of the upper end. Historical comparison: Comparable to the average war - How the 6% to 8% GDP-per-person loss was characterized in the discussion. Political salience in January 2019: About 75% - Share of the British public who considered Brexit the most important issue at the time. Current salience of Brexit: About 2% - Menon says Brexit is now far less central to public concern. Erasmus Plus participation fee: Half a billion pounds for one year - UK cost cited for membership/participation in Erasmus Plus. Youth mobility negotiation: Cap on numbers and domestic fees for EU students - Main sticking points in talks over a youth mobility scheme. UK trade deals mentioned: Australia, New Zealand, Japan - Examples of trade agreements that would be politically embarrassing to unwind if the UK rejoined a customs union.

Pivotal Quotes: "Brexit was the best thing ever to have happened to the British." — Samaya Keynes: Ironically framed scale question prompting Menon to rate Brexit’s impact. "I think it's surprisingly politically important." — Anand Menon: On the difficulty of abandoning non-EU trade deals if the UK pursued a customs union or deeper EU alignment. "I would actually, I think it would be good politics to place less emphasis on this because otherwise you run the risk of coming up empty-handed when you've said you're going to have a deal, which is never a good look." — Anand Menon: Advice on the UK government’s approach to the EU reset negotiations.

Implications: Listeners should expect Brexit to remain a live political issue, but the most realistic gains now lie in targeted security cooperation, not a rapid economic reset. Any future rejoin move would need clear public trade-off messaging and a serious strategy on immigration.