Lord O'Neill of Gatley
Main Page: Lord O'Neill of Gatley (Crossbench - Life peer)
Lord O’Neill of Gatley (CB)
My Lords, I now find myself wondering whether the most passionate advocates of Brexit, some of whose arguments we have just heard the noble Lord illustrate, are secretly in favour of a second referendum on the original question. If not, I cannot see any of their logic. Brexit with no trade deal—the ultimate consequence of no transition—is anywhere from worrying to extremely bad. I shall make three quick points.
First, the world economy has shown in the first half of this year probably its strongest performance compared to any since the 2008 crisis, with eight of the 10 largest economies in the world accelerating. However, there are two notable exceptions—sadly, one of them is the UK. It would normally be close to impossible for the UK not to benefit from such a synchronised global upswing. In fact, our economy has slowed. We do not really know why, but it is probably to do with the weakness of investment spending and the pressure on consumers coming from sterling-related weakness in the cost of living— both of which can be traced to Brexit.
The second, more concerning, point is that after a very small lift in 2016, our productivity performance has apparently turned down again. Long-term economic growth is driven by two factors alone: the size and growth of the labour force, and that force’s productivity. If we pursue Brexit at any price, we will add a fresh challenge to that of our weak productivity through a significant threat to the significant advantage our labour force growth has shown.
Thirdly, as I have highlighted once before in this House, at the end of 2016 China became Germany’s number one trade partner, overtaking France and the US. You are good at trade if you are good at trade. To be good at exporting, we must produce things that the fastest growing domestic economies want, as well as, or instead of, being very competitive and/or trading on the best terms available. For the UK, a small—too small, sadly—group of companies have such strong brands that it is possible that defaulting to WTO rules may not be a massive issue for them. An example close to us might be open-top bus tours around Westminster, which would probably have a market, irrespective of this outcome.
To be seriously more successful in international trade, we need a dramatically increased effort toward the largest and fastest growing economies in the world, not just sentimental relationships with Commonwealth countries. This year, China will add another $1 trillion to global GDP. That is equivalent to creating five new New Zealands in one year. A lot of industries are not in the position of open-top bus tours around Westminster; for those that are highly integrated into the world economy, defaulting to WTO rules is likely to be highly damaging. I can think of at least two such major industries: autos and finance, the latter of which the noble Baroness, Lady Kramer, talked about. Do we deliberately want to reduce the importance of each of those? Autos, by the way, is one of the few major industries that has been highly productive in the past 30 years, although there may be many others. The time has come for less emotion and more focus.