London - The small band of maverick economists who lobbied in favour of Brexit claimed yesterday that the UK could avoid a recession and even receive a significant economic boost from the vote to leave the European Union - but only if the UK government adopts their plan to unilaterally scrap all import tariffs and forgets trying to negotiate a free-trade deal with the rest of the EU.
At a press conference in London, Patrick Minford, the co-chair of Economists for Brexit, said the collapse of sterling against the dollar to 31-year lows since the Brexit result was a welcome “automatic stabiliser for the economy” which would boost exports and wages, offsetting any negative impact from firms delaying investment spending because of the uncertainty over trade.
“Once the irrational scaremongering subsides and is replaced by rational expectations over the long term, including the crucial move to unilateral free trade, our economy will prosper,” he said.
But moving to unilateral free trade would come at a severe price for certain major UK industries. Professor Minford, who is professor of applied economics at Cardiff Business School, himself admitted in a column for The Sun in March that such a policy would “mostly eliminate manufacturing” in the UK, by dismantling existing barriers to all manufacturing imports from the rest of the world.
Yesterday, Professor Minford once again insisted that, overall, the UK would be better off. “Unilateral free trade will generate growth by acting effectively like a large tax cut for UK households and firms,” he said.
“The result of this is to increase GDP by about 4 percent and other benefits from leaving the EU, as less regulation will increase it further.”
In new post-Brexit forecasts issued yesterday, the group said UK GDP could grow by 2.3 percent this year and 2.7 percent in 2016 if the Government followed their advice. By contrast, most other City of London economists are forecasting a steep drop off in growth over the next two years, with a high probability of the UK falling into a technical recession. The Office for Budget Responsibility is due to deliver its own post-Brexit forecasts in the autumn.
The economic model used by Professor Minford to deliver his forecasts has been severely criticised by other analysts at the London School of Economics as being built on ideology, rather than facts. They argued, before the referendum result, that it ignored “basic facts” about international trade, such as that countries tend to trade more with geographically close countries and that the EU has created trade, rather than merely diverting it from elsewhere.
The group said yesterday that the UK should invoke Article 50 divorce proceedings with the EU without delay and retrieve the UK's powers under the World Trade Organisation. Member Martin Howe said that “the UK will be able to undertake actions which require no agreement with EU members such as unilateral free trade, repealing or consolidating laws and enable the UK to re-join membership of all international bodies.”
Yet the new Prime Minister, Theresa May, has said she will not trigger Article 50 until next year at the earliest. There is also intense pressure on Ms May to retain the UK's access to the EU's single market for goods and services.
The vast majority of senior UK academic economists argued Brexit would make the Britain worse off, both in the short term and the long term. More than 170 signed a letter to The Times making that case. By contrast there were eight members of Economists for Brexit, although their number was increased by two new supporters yesterday.
THE INDEPENDENT