Last year in the run up to the referendum vote I had an email exchange with Roger Bootle of Capital Economics who writes occasionally in The Telegraph and The Spectator. I asked him how potential tariffs on goods supplied to the EU would help our exports. His answer was they wouldn't but the average tariff of 4% would easily be compensated by a fall in the value of Sterling. Mr Bootle is a keen Brexiteer and he and John Mills, another Brexiteer who funded Vote Leave and now funds Labour, wrote an article in The Spectator (HERE) saying we should celebrate the fall in sterling because it would help exports.
Well figures are out today for June 2017 and show our goods trade gap widened to a nine month high of £12.7 billion - and remember this is just for one month! According to Reuters (HERE):
A year after Britain voted for Brexit, there is still little sign that exporters have gained much by way of competitiveness from the fall in the value of the pound after referendum. The Bank of England has said it is counting on a recovery in exports to help lift growth in the economy.
"This is a disappointing set of data for a country that has recently seen an 18 percent fall in the currency," said HSBC economist Elizabeth Martins.
The ONS figures show exports to the EU are actually rising faster than to the rest of the world - just as we are planning to leave! After Brexit there will be more friction on EU trade, where our exports are rising fastest. The problem is we are still importing as much or more even with the devalued pound. Reuters report says:
Industrial output contracted 0.4 percent on the quarter - in line with previous estimates - while construction declined by more than previously thought, driven 1.3 percent lower by less public sector, commercial and repair work. Forecasters at Britain's National Institute of Economic and Social Research (NIESR) estimated that the data showed GDP growth in the three months to July slowed to 0.2 percent.
So much for a fall in the value of sterling boosting exports and the economy. Most economists said this would happen. We have devalued our currency umpteen times over the last century and there has never been a sustained improvement in exports. Messrs Bootle and Mills were plain wrong.
It looks like the problems that The Treasury forecast for the economy, while a bit late, are finally coming true. Project "fear" was actually project reality as The Guardian report (HERE) makes clear.
