|Welcome to Econ 050: Economics and business that matters to the Netherlands and the world. In each episode, Northern Times editor Traci White interviews a new expert about everything from trade wars to the psychology in your shopping cart. This podcast is a co-production between The Northern Times and the Faculty of Economics and Business of the University of Groningen.|
Brexit: Professor Bart Los looks past the politics and into the true economic impact of the United Kingdom leaving the European Union
Trying to divine what the United Kingdom will be like in a post-Brexit world is a daunting task, but Bart Los, a Professor of the Economics of Technological Progress and Structural Change, is working to do just that: crunching the numbers to figure out what the impact of Brexit is likely to be on jobs and the economy not only in Britain, but in neighbouring countries with extensive trading relationships, including the Netherlands. He and his research partners have analysed what industries and regions seem likeliest to take a hit after the UK leaves the EU, and to put it bluntly, it doesn’t look pretty. This episode comes with a disclaimer: we recorded this conversation in late October, so things – mainly ministers and the terms of the Brexit deal – will have changed yet again by the time you hear this, but our goal was to try and go beyond the daily incremental political changes and focus instead on the real, tangible consequences that Brexit could have on jobs and livelihoods, so I sat down with professor Los to hear more about his findings.
On why making an acceptable deal is so challenging:
Bart Los: Theresa May has to come up with some kind of two sided negotiations. I think that if she only had to negotiate an agreement with the EU that they would find an agreement because a good deal is beneficial for both parties. If she would only have to strike a deal with hard Brexiteers like Boris Johnson, Jacob Rees-Mogg, etc. then most likely she would also be able to strike a deal. But the problem is that these two deals have to be the same. And that seems to be almost impossible. So no, I think she is in a very problematic position and I also don’t know if anyone else would have done a better job, given this situation, so there’s a lot of criticism about her leadership etc. That’s hard for me. That’s also not my field to judge whether these claims are justified or not.
On which regions are likeliest to be hardest hit by Brexit:
Bart Los: The regions that tend to be poorer are the regions that are most exposed to the trade consequences for Brexit, which means that it’s very likely that the inequality problem that is already rather prominent in the UK will be will become even worse as a consequence of this. And in an earlier study, we related dependence on the EU to the actual outcome of the referendum, and then we came up with a rather paradoxical finding: that in those regions that are most dependent in economic terms on the EU, the share of leave voters tended to be largest.
On how much other countries, including The Netherlands, are set to be impacted by Brexit:
Bart Los: After Ireland and Germany, we find that the Netherlands is the country that is most likely to be hit hardest, but the percentages are much lower than for Ireland and for southern Germany, for example. So we find it for the Netherlands, the risk is something in between 3 percent and 4.5 percent in terms or for labour income that might be lost as a consequence of this.
In the Netherlands, it’s mainly manufacturing industries that will suffer. In the UK, the story is different because the UK is very strongly specialised in services and we also find if we look at jobs at risk, that it’s mainly services industries where this percentage is very, very high.
On whether the United Kingdom could still turn back:
Traci White: What do you think about the prospect of potentially holding another referendum or potentially just kind of pumping the brakes and saying, alright, let’s just scrap this and try to get back to normal?
Bart Los: That’s a hard question. So last Saturday we had this this march in London, and the aim of this march was to get a second referendum or a people’s vote as other people call it, I don’t know. Many people argue, even some Remainers argue, that the UK had this vote already and you can vote on issues like these every week, but it won’t help you. Other people say, okay, that’s true, but we voted on the basis of a campaign that was full of lies. So the leave campaign hasn’t told the truth, and now we know more about the truth so we should have the opportunity to vote again. But there’s also a practical issue playing a role here: if a second referendum would be organised it would imply more delays in the negotiations with the European Union, and many people who know everything about decision making in Europe and decision making in UK say that a final deal between the U.K. and EU should be signed at the summit, the euro summit in December, mid-December. Otherwise it will be too late because the otherwise the ratification process cannot be completed in time. A second referendum would have to be organised before time there’s no time no time left, so I think that’s also an important issue here. At the same time even without a second referendum, it might be that Theresa May will not survive the next few weeks. Almost every day you read in British newspapers at the moment that her situation is becoming more and more precarious. So that would also lead to, well, in addition to the shambolic situation in which UK politics is at the moment, this situation has a direct impact on the negotiations with the European Union. So the situation is extremely uncertain and I really don’t know what’s going to happen. I think nobody knows.