Prof. Tim Congdon CBE, runner up to Nigel Farage in UKIP’s 2010 leadership race, latest email on the ‘Remain’ campaign’s “baloney” predictions:
The debate on Brexit continues to dominate headlines, including the headlines of newspapers published far from Britain and even from Europe. However, the significance that financial markets have attached to the referendum vote tomorrow is out of all proportion to that vote’s consequences. The UK’s exports to the European Union are about 12½% of its gross domestic product. Obviously, that means that the fortunes of 87½% of the UK economy are not directly affected by the terms of its trade relationship with the EU. If the UK does decide to leave the EU, and is unable to agree a special deal (or set of deals) to preserve a free-trading interaction with its neighbours, its exports to the EU would be subject to the common external tariff. The average level of the CET is usually cited as 4%. Then, if the volume of output sold in the EU fell by the implied price rise (i.e., 4%), the drop in exports would be…well, 0.5% of GDP. So – in this sort of outcome, which is the worst imaginable – that is the sort of result that might be expected. (In practice, British companies would accept some loss of profit margin, while they would find non-EU markets to replace the setback in the former EU market.)
The notion that the UK could lose as much as 10% of national output – which has been put about by George Osborne on the back of so-called “research” from Her Majesty’s Treasury – is obvious baloney.
In fact, financial markets – and the reporting of financial market proceedings by leading newspapers, such as The Wall Street Journal and the Financial Times – are in an absurd tizzy about Brexit. Yes, over time various structures and institutions, and trade and investment patterns, would be different if the UK were outside the EU and not inside it. But journalists’ claims that US Treasury yields, the oil price and the Mexican peso have dropped because of “skittishness” about Brexit are loopy. Even UK companies’ output expectations – as reported by the Confederation of British Industry’s monthly survey – have not been affected adversely by the Brexit debate. Indeed, the net balance of companies intending to raise output in the next three months has risen during the Brexit debate!
In short, Brexit fears have been grossly exaggerated.