Britain’s economy is on a tear, writes Brian Lee Crowley, but if it wants to stay that way it’ll need to make the right decisions on the European Union, political leadership and immigration.
By Brian Lee Crowley, Feb. 19, 2016
What was old is new again.
If you thought that Britain was an ageing doddery has-been barely managing the gentility of its decline, think again. In a stunning proof that how countries manage themselves matters, Britain is on a tear. How this happened is full of lessons for the rest of us.
In 2014, Britain overtook France to become the second largest economy in Europe in terms of GDP. And according to the Centre for Economics and Business Research (CEBR), on current trends by 2030 Britain will have overtaken a flagging Germany to be number one on the old continent and the fifth largest economy in the world.
And according to the Legatum Institute’s global Prosperity Index, the UK is, “the entrepreneurship capital of Europe. The UK ranks 6th globally for Entrepreneurship & Opportunity and 70% of Britons now think the country a good place to start a business. This is the highest in the EU and higher than almost every developed nation in the world.”
What was old is new again.
It doesn’t hurt that Britain stayed out of the euro, the currency of most of the members of the European Union (EU). Lack of its own currency (along with population ageing) is one of the factors the CEBR points to in explaining Germany’s projected relative decline. Moreover it is Britain’s long-term openness to newcomers over the years that is feeding its demographic and economic dynamism.
Those positive factors aren’t enough, however. Britain has made a large bet on the animal spirits of its entrepreneurs and they are coming through in spades. The government has been dramatically cutting the cost of doing business. Not only is corporate income tax falling, but the cost of starting a business is as well. In just a few years the cost of starting a business has fallen by half and now stands at £81.45, the third lowest in the world.
Nor is this growth limited to the wealthy and dynamic south-east. While it continues to enjoy the highest business start-up rates in the nation, the two regions hardest on its heels are the North East and North West, as Scouses and Geordies show levels of entrepreneurial energy perhaps not seen since Queen Victoria was on the throne.
Britain has made a large bet on the animal spirits of its entrepreneurs and they are coming through in spades.
Perhaps surprisingly for an economy many still associate with sunset industries, Britain’s renaissance is being led by software and high-tech, married to an openness to the best ideas wherever they are to be found. That’s why Britain and the US are both energetically investing in each other’s tech sectors, creating a trans-Atlantic partnership premised on markets, innovation and entrepreneurship that will lead the world.
That’s assuming of course that current trends continue. There are lots of ways Britain could stumble. They could elect Labour Leader Jeremy Corbyn as prime minister. If there is a poster child for the declinist nanny-state consensus that brought Britain to its knees until Margaret Thatcher hit it with her handbag, Corbyn is it.
Then there is the threat of Scottish secession. The non-Scottish part of the UK is so big relative to Scotland that it would likely be relatively little affected, but Scotland would be choosing divorce just at the moment when membership in the Union is about to pay its most handsome dividends.
More important than either of those, however, are the threat of withdrawal from the EU and a declining British appetite for immigration.
Britons must know that the greatest enemy of prosperity is uncertainty and that a British exit (“Brexit”) from the EU is a big gamble whose consequences are, to say the least, unknowable. No one has more sympathy than I with British frustration with smug Eurocrats’ absurd and interfering ways and it is undeniable that there are deep cultural differences between the long tradition of individual freedom and limited government in Britain versus the statism of the Continent.
On the other hand, the picture of British prosperity I have been painting proves that Britain can blaze its own trail even while remaining in the EU. Moreover Britain and its continental allies like Holland, Sweden, Poland and other market-oriented northern Europeans represent a powerful reform bloc within the EU that a resurgent Britain could lead if only it would get over its Europhobia.
Britain’s renaissance is being led by software and high-tech, married to an openness to the best ideas wherever they are to be found.
Liberal Britain has also been one of the best countries in Europe in terms of its openness to immigration and its success in opening its economy and institutions to newcomers. That openness is an integral part of the economic success it is enjoying. Yet Britons are getting more and more anxious about immigration, egged on by nativist loudmouths. The political class need to show they have the spine to manage large-scale immigration unapologetically in the national interest.
Britain’s world-leading days are far from over, unless, through ill-considered choices, they decide otherwise.
Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca