The UK’s economic future is less certain than it has been at any time since the 2008 financial crisis, says Mike Buckley
COVID-19 is a global economic crisis as much as a public health one. The economic fall-out could be as difficult for governments to navigate as its health consequences continue to be – as well as more enduring.
In the UK, we know little of the Government’s plans beyond a vague commitment to ‘build back better’. The sense of a lack of direction is compounded by its lack of clarity on plans for the post-Brexit economy. Britain has won the right to diverge from EU standards and regulations but has so far failed to lay out plans to do so.
But the challenges facing the UK economy don’t end there. In the next decade, the country will have to confront the ongoing technological revolution and the transition to net-zero emissions of greenhouse gases. Doing so will require “policy, not gestures, and respect for reality, not slogans” – all the more given that the country starts from a base of stagnant productivity, high inequality, rapid ageing, and high debt.
Given the track record of this Government and its leadership, this gives cause for concern.
Post-Pandemic Challenges
The Coronavirus pandemic arrived at the end of the long decade that followed the 2008 financial crash. That crisis could have been an opportunity for the global left to expose and rebuild the system that enabled it – from one built on low wages, exploitation and precarity; to one in which workers were more greatly valued, the power of trade unions increased, and the climate and environment were valued instead of exploited.
Instead, business as usual continued – assisted by the transfer of manufacturing to low wage countries, such as China, which kept the price of consumer goods low while the use of overseas workers kept costs down for employers.
Ten years on, the first signs of a reshaped economy following Brexit and the Coronavirus crisis are beginning to emerge. Employers are experiencing a shortage of workers, particularly in hospitality but also in construction, road haulage, food processing and fruit and vegetable-picking.
Business leaders are already calling for the Government to rethink its post-Brexit approach to labour mobility. Tim Martin, head of Wetherspoons pubs, is the most famous name to raise concerns. His call for a visa scheme for EU workers caused some surprise due to his longstanding support for Brexit but, in fairness, the Brexit he wanted included continued freedom of movement.
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This labour shortage, however, is global. The EU peak migration demographic of 20- to 34-year-olds is falling by one million per year. China’s workforce began to decline nearly a decade ago. The US Chamber of Commerce is warning of a crisis affecting businesses “across every industry, in every state”. There are comparable issues in other countries such as Germany, Norway, Australia and Singapore.
The UK made this situation worse with Brexit. More than 1.3 million foreign nationals left the UK in 2020 due to Brexit and the pandemic. Many will not return given the end of freedom of movement, the wage cap in the Government’s new points-based immigration system, and the loss of rights and status if they do come back.
Worker fatigue after a decade or more of being undervalued is also creating shortages. Staff have left hospitality and other sectors in search of better options. Unions blame low pay, poor conditions and precarious contracts. “I had enough of the unsociable hours, I had enough of the low wages, I had enough of being spoken to like a second-class citizen,” one former hospitality worker told The Big Issue. “I got to the point of thinking: there’s more to life than this.”
Any immediate change is unlikely. Politically, the Government is too attached to the end of freedom of movement, while wage rises will be publicised as a Brexit dividend. One of the Home Secretary’s aides insisted businesses “can’t always say the answer is to hire cheap foreign labour”.
Some restaurant chains are reportedly raising pay by as much as 15%; construction businesses by 10%. Wage stagnation has had a damaging impact on poorer households for decades, in particular since the financial crash. But celebrations may be premature. Post-Brexit, we still have little idea of the kind of economy Boris Johnson and his Chancellor want to create, or their ability to create it.
Competing Visions of the Future
Part of the problem is that the Prime Minister sold two competing visions of a future economy in both 2016 and 2019. This constructive ambiguity was necessary, observes Anand Menon, for Boris Johnson to maintain “a disparate coalition comprised of proponents of a liberal, free trading Britain free of the ‘shackles’ imposed by Brussels, and those arguing [for] a future that would insulate the UK from the pernicious consequences of globalisation”.
This ambiguity arguably cannot hold past the Brexit transition period. Johnson has to satisfy one or other of his Leav