Sir Ed Davey, leader of the Liberal Democrats, has used the anniversary of the 2016 referendum to advocate for the UK's reintegration into the European single market. Speaking on Wednesday, Sir Ed described Brexit as an 'experiment that has failed' and emphasised that the global landscape has significantly changed since the vote. This stance brings renewed focus to the economic implications of the UK's current relationship with the European Union, particularly for households and businesses across the country.
The original Brexit campaign, according to critics, downplayed the economic costs of severing ties with Britain's largest trading partner. While free movement of people was a central issue during the referendum, the economic benefits of seamless integration with European markets were often overshadowed. A decade on, with what some describe as 'forsaken growth', the Liberal Democrats are highlighting the economic and strategic rationale for closer ties. Opinion polls are frequently indicating a majority of the public would now vote to reverse the 2016 referendum outcome, suggesting a shift in sentiment.
For UK businesses, particularly those engaged in international trade, rejoining the single market could mean a significant reduction in customs checks, paperwork, and regulatory divergence. The Office for Budget Responsibility (OBR) has previously estimated that Brexit will reduce the UK's long-run productivity by 4% compared to remaining in the EU. This lower productivity, in turn, impacts wage growth and the overall competitiveness of UK firms. Easing trade barriers could potentially boost exports and imports, benefiting sectors that have struggled with new logistical and administrative burdens since the UK's departure.
However, any move towards rejoining the single market would necessitate accepting the principle of free movement of people, a contentious issue in domestic politics. This requirement was a primary reason for reluctance among some politicians to advocate for closer European ties previously. The Liberal Democrats acknowledge the formidable challenge of altering political narratives around migration but argue that the economic and strategic realities, including current geopolitical instability and the actions of global powers, underscore the need for a re-evaluation of the UK's position.
While the Liberal Democrat proposals are unlikely to be enacted in the immediate future, especially given the current political climate and the Labour Party's stated red lines against single market membership in their 2024 manifesto, the renewed debate aims to shift the broader political discourse. The argument is that the economic case for integration with Europe will only gain traction if politicians are prepared to articulate it. The Bank of England has also frequently highlighted the impact of trade barriers on inflation and economic growth, suggesting that any policy that eases these friction points could have a positive effect on the UK's economic outlook.