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Brexit isn’t going to plan Both the Left and Right are terrified of economic nationalism

Economic nationalist: Boris Johnson. Credit: Jeff J Mitchell/WPA Pool/Getty Images)

Economic nationalist: Boris Johnson. Credit: Jeff J Mitchell/WPA Pool/Getty Images)


July 8, 2021   5 mins

Brexit isn’t going according to plan. We were promised utter devastation. The punishment was expected to be especially severe on those parts of the country that voted to Leave. 

What little manufacturing that the North and Midlands had held on to was expected to collapse as barriers to trade went up. Vengeful Remainers were especially looking forward to the comeuppance of Sunderland — the city that delivered the knock-out blow to Britain’s membership of the EU. Good luck holding on to your Nissan car plant, suckers!

But five years on and Nissan is still here and expanding. A billion pounds is being ploughed into the production of electric vehicles and the batteries are included — Nissan’s partner, Envision AESC, will be building a ‘gigafactory’ to produce them. Vauxhall, meanwhile, is investing a hundred million into its Ellesmere Port plant. The factory will produce electric vans — for which demand is soaring. And there are reports that the British Government is working with Tesla to find a UK site for a major manufacturing centre.

Whatever one thinks of Brexit, these are developments that everyone should welcome.

But Britain wouldn’t be Britain without its moaning minnies. And there are two sets of people who aren’t happy: firstly, the hardcore Remainers for whom any assertion of the British national interest is pure jingoism; and secondly, the free market fundamentalists for whom any government intervention in the economy is a slippery slope to the Seventies, if not downright communism. 

There’s a lot going on to raise their hackles. The Nissan and Vauxhall deals won’t have happened without the Government fronting-up a portion of the overall investment. Last week, the ministers moved to sweep away the EU rules on state aid that stand in the way of further state subsidies. Ministers also decided to keep the trade restrictions that help protect the UK steel industry from cheap imports. And then there’s the National Security and Investment Bill, which was introduced last year to protect British companies from “malicious” foreign investors. 

Meanwhile, Labour is trying to get in on the Government’s act: Keir Starmer has unveiled a Buy British plan to bolster companies through public procurement. 

Critics on both Left and Right see any turn towards “economic nationalism” as a bad thing. But does it have to be?

If you believe in a borderless world in which we have no special loyalty to our compatriots, then any kind of nationalism is bad. But if, like most people, you do believe in the nation state — and that a national government should put its own citizens first — then what is wrong with nationalism in the economic sphere?

The most obvious answer is that free trade is a good thing — and that Britain should not disrupt the level playing field of international competition. It’s a nice theory, but it ignores the fact that the playing field is anything but level. British industry is fighting an uphill battle, because our competitors have no qualms about tipping the terms of trade in their favour. Just look at export-led economies like Germany and China.

Both of these countries benefit from rigged exchange rates. In Germany this is achieved through the single currency. If the Deutschmark were still around, you can bet that it would be trading at a much higher value against the Pound than the Euro does. This would make German exports a lot less competitive. As for China, it builds up enormous foreign currency reserves, while restricting access to its own currency. The result is a mismatch in demand that skews the exchange rate to the advantage of Chinese exporters.

There are other weapons in the armoury of the economic nationalist. For instance, EU figures show that, as a percentage of GDP, state aid to German industry is more than three times what it is Britain. Subsidy levels are also high in countries such as Hungary, Czechia and Poland — all of them key export markets and cheap labour suppliers for German industry. China subsidises its industries too — through direct support, access to low interest loans and crazy levels of infrastructure spending. It also protects its businesses from foreign competition while enjoying open access to western markets. 

So when the economic globalists talk about free trade, they don’t mean free trade at all. They mean that we should we leave ourselves wide open to the rampant economic nationalism of other countries. 

But so what? If these countries want to sell us their stuff at a knockdown price, then don’t we benefit? Let the Germans and Chinese do what they do best, while we concentrate on what we do best. That way we’ll all get richer. 

Except that we haven’t got richer. Not lately. The UK in particular has suffered from more than a decade of low growth. In terms of GDP per head we are bottom of the league of north European countries (a comparison that was gleefully seized upon by the SNP to make the case for Scottish independence). As for the rate of productivity improvement — on which all prosperity ultimately depends — we’re doing the worst out of the biggest western economies.

The free marketeers have got some explaining to do. This country has done more than most to follow their ideological prescriptions. We’ve thrown open our borders to the flow of goods, services, capital and labour. We’ve allowed foreign interests to buy up our companies and our property. Our public procurement policies emphasise value for money not buying British. For decades, we barely bothered with an industrial policy — and left business investment up to the private sector. And furthermore we’ve encouraged that investment with lower taxes and lighter regulation. 

Why, then, aren’t we more productive?

But let’s not just look at the British economy in the abstract. We must also count the human cost. A low-skill low-wage economy comes at a terrible price to pride and hope. That’s especially true when these patterns of work define entire communities and regions. We should, of course, be thankful that we have a job-creating economy, but quality matters as well as quantity. 

The fact is that a policy of economic disarmament — of leaving Britain undefended against the economic nationalism of our competitors — has only delivered prosperity and wellbeing to some of our people. And that is not enough. British voters are demanding more, which is why our Government has tentatively embarked upon a policy of economic rearmament. Above all, this means doing what it takes to build up industries that provide high quality jobs. 

The sceptics will argue that the British economy is perfectly capable of doing that already. For instance, Julian Jessop in the Telegraph holds up the example of the UK’s tech sector. Britain is now home to more than a hundred tech companies worth more $1 billion. This is “a larger number than the rest of the Europe combined”, he says. No need for continental-style industrial policies, then.

Except that key centres of innovation — like London’s Silicon Roundabout — have benefited greatly from government programmes. Public funds have been been ploughed into the capital’s infrastructure — and also into Britain’s world-beating universities. The achievements of our tech entrepreneurs should be celebrated, but their industry has been supplied by the state with the vital resources of connectivity and brainpower.

There’s no reason not to give other strategically-important industries what they need to succeed too. What some industries require may be more specialised than others but the principle is the same. If individual companies can’t bear all the costs and risks involved, then there’s a case for government shouldering some of the burden.

Since the public purse is not bottomless, funds should be deployed where they will make the most difference. However, unlike a private investor, government has the ability and the duty to consider more than just the financial bottom line. Above all, there is goal of providing satisfying, well-paid work not just in some places but throughout the nation. 

In the end, that is what economic nationalism comes down to: economics as if every Briton matters. 


Peter Franklin is Associate Editor of UnHerd. He was previously a policy advisor and speechwriter on environmental and social issues.

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Tony Taylor
Tony Taylor
3 years ago

It’s my theory – and I’m sticking to it – that politics is the art of exaggeration. The Remainers exaggerations were all sneery and shouty and Chicken Little, which were always going to bite them if they lost because the outcomes are typically never as bad as they are painted. Now they still look sneery and shouty and Chicken Little, but they also have a faceful of egg.

Matt B
Matt B
3 years ago

Good article (below yet another odd headline). But when the government’s new National Security rules still allow UK chip makers to fall into chinese hands (amid a global supply deficit), in the latest case due to performance-related trigger clauses in the welsh firm’s own contract clauses, you have to wonder if all is well. Amid the evident good news lurk concerns: notably an EU drift to Russia, and China/France sewing up the UK energy sector (while France threatens to cut off energy supplies over NI Brexit rules and seemingly encourages the UK’s wider break-up).

Last edited 3 years ago by Matt B
Charles Hedges
Charles Hedges
3 years ago

GDP per head is lowest amongst north western European countries because Britain has a lack of technically skilled people who can produce high value products and services. This was highlighted in 2008/2009: graduates in engineering frpm good universities were receiving four job offers from top companies.
Switzerland has a whole industry producing watches even though cost of living is high because the product is high value, low volume and low mass. Producing a Swiss watch which sells for ÂŁ5000, requires little materials, energy or space; just very highly skilled people. One way of assessing value of product is Cost per Kilo and cost per area of factory. ÂŁ5000 /0.1Kg for watch is ÂŁ50,000/kg. A BMW 5 which sells for ÂŁ50k and weighs 1.7T =ÂŁ29/kg. Swiss watches are basically outsource, energy and materials cost proof. Britain needs to train it’s people so we can develop industries similar in value to Swiss watches.
The high tax rate and compexity of tax laws from the 1960 meant accountants ran business, not engineers resulting in R and D and technical training being cut back.The complexity of tax laws meant it was easier to increase profits by fiddling the books which gave power to the accountants( at the expense of Engineers) rather than developing products via R and D which is uncertain as much is trial and error. British Egineers designed motorbikes in the 1960s which were never built and Japan introduced such types in the 1970s. In the early 1990s most construction companies closed their R andD/ engineering laboratories. The Grenfell Fire is an example of what goes wrong when people in charge do not understand the science and engineering.
One could say the UK started it’s industrial decline when Dr Arnold of Rugby School chose a classical syllabus rather than a mathematical,scientific and technical one. Napoleon developed national technical education via the Grand Ecoles which was copied by Bismarck in his Blood and Iron Policy. The rest is history.

Hubert Knobscratch
Hubert Knobscratch
3 years ago
Reply to  Charles Hedges

Britain does NOT have a shortage of technically skilled people.
It never has done.
It doesn’t now.
It never will do.
It has a chronic shortage of willingness to pay for them.
I received an email this week for a possible staff role in Germany for the next generation of electric aircraft. It’s of no interest to me so I sent it onto a friend of mine who is working on this in the UK. The salary is 94% higher in Germany.
I’m currently at a company on a contract basis as many of their engineering staff are leaving due to the poor salaries on offer. So who are the new staff arrivals to take them further?
Another commercial manager
Another bid manager
Another financial manager
Another HR bod
Lots of fresh graduates and interns
Engineers with 10 years’ experience behind them to get the drawings out by Friday?– none


Last edited 3 years ago by Hubert Knobscratch
Charles Hedges
Charles Hedges
3 years ago

The complexity of tax laws meant accountants were promoted to board level quickly while Engineers never reached that level. There are water companies run with no Chartered Engineers on the boards.
Britain has been blessed with a small number of brilliant engineers and scientists who made up for lack of quantity with quality. Since the 1960s Britain has had enough engineers and craftsmen to supoort a small scale but high quality industrial( Biotech, luxury and grand prix cars, satellites ) base but lack the numbers to support an industrial base the size of the advanced high value German and Swiss.
Where Britain is particularly deficient is in the high quality craftsmen( NVQ 3 to 4 ), technician ( HND )and middle ranking engineers which Germany and Switzerland produce in abundance which are required for high value advanced industry.

Colin Elliott
Colin Elliott
3 years ago
Reply to  Charles Hedges

The best companies I worked in, many years ago, were run by engineers, assisted by me as an accountant. I understood and could mostly quantify that investment and R&D were vital, yet we weren’t allowed to do so without preparing detailed justifications which were almost always refused because the holding company didn’t like the risk or the short-term reduction in cashflow. The influential treasury department were able to accumulate funds to maintain dividends or buy overpriced businesses, and meanwhile earned Brownie points by achieving good returns on overnight money. `

Charles Hedges
Charles Hedges
3 years ago
Reply to  Colin Elliott

Thank you for your comment.GEC being a good example. They introduced 90 day payment.

Lesley van Reenen
Lesley van Reenen
3 years ago

This pandemic has surely taught us that supply chains and local manufacturing need to be relooked.

Andrew Fisher
Andrew Fisher
3 years ago

The problem with this argument is that the British state has over decades had an exceptionally poor record of ‘picking winners’ and regional policy. Short term political expediency and the desire for ‘sexy’ projects win out every time over long term planning (even if we concede a case for the latter) or even basic maintenance – the condition of our roads on which 80% of traffic is carried – is a disgrace. Humber Bridge anyone?

Maybe this could change, but the eye wateringly expensive and increasingly ludicrous boondoggle of HS2 doesn’t give a great deal of hope.

Last edited 3 years ago by Andrew Fisher
Dan Gleeballs
Dan Gleeballs
3 years ago

Historically, free trade has enriched all parties, though it’s utterly counter-intuitive. The proof is in a wealthier country fifty years after the seventies. Even allowing for inflation, how many iphones would have sold in 1972?

China tests the system and the consensus, of course. I suspect their vast middle class will want more say in time, but it’ll take a couple of generations yet.

Franz Von Peppercorn
Franz Von Peppercorn
3 years ago
Reply to  Dan Gleeballs

The country is richer than the 70s but the 70s was richer than the 1940s, and more so.

Ian Barton
Ian Barton
3 years ago

Good luck getting a 40s to 70s comparison that controls for proximity to World Wars 
.

Franz Von Peppercorn
Franz Von Peppercorn
3 years ago
Reply to  Ian Barton

You are going to have to elaborate a bit more. There’s nothing certain that “having a devastating war” causes economic growth afterwards. Historically it doesn’t more often than not.

It was the economic policies after the war that turbo charged the economies, and those policies were more often statist and nationalist – in the sense that borders were controlled for both labour and capital.

Last edited 3 years ago by Franz Von Peppercorn
Ian Barton
Ian Barton
3 years ago

Indeed – it just doesn’t seem that the start of the 70s would in any way equate to the start that was the 40s

Franz Von Peppercorn
Franz Von Peppercorn
3 years ago
Reply to  Ian Barton

No idea what you are trying to argue here.

Ian Barton
Ian Barton
3 years ago

If can you elucidate further on your 40s comment, I’ll try and close the loop.

Franz Von Peppercorn
Franz Von Peppercorn
3 years ago
Reply to  Ian Barton

My comment was clear. Your answers are clouded.

Ian Barton
Ian Barton
3 years ago

very weak response

Michael James
Michael James
3 years ago

The case for free trade doesn’t assume or require a ‘level playing field’. If other countries commit economic self-harm by rigging their markets in favour of home-produced goods and services and forgoing imports of superior foreign-produced ones, why imitate them?

Last edited 3 years ago by Michael James
Franz Von Peppercorn
Franz Von Peppercorn
3 years ago
Reply to  Michael James

They don’t commit economic self harm by doing that. Most successful developing countries have done exactly that – Japan, Korea, now China and the 19C US.

Last edited 3 years ago by Franz Von Peppercorn
Michael James
Michael James
3 years ago

The countries you list produce a lot for export. Are the countries that buy those exports better off or worse off as a result?

Kristof K
Kristof K
3 years ago

Dear Mr Franklin,

Damn right that “Brexit isn’t going to plan”, even though you tried to use this headline as some form of click-bait irony what with your being, as far as I can glean, an avid pro-Brexiter.

At some point, surely, you’re going to have to acknowledge the ever more circuitous and disingenuous train of argument you need to deploy so as you can avoid the truth.

Of course the news about Nissan, Vauxhall and Tesla to which your article refers must be considered good news by anyone who identifies with this country (the UK) and who cares deeply for the future of it and its people. 

Yet your article touches on two questions which it nevertheless completely avoids trying to explain (or maybe it’s just that I’m too sophisticated and remoany to divine the explanation for myself).

  • How is it that Germany can subsidise its industry to the equivalent tune of 3 × the proportion of its GDP compared to the UK without having to “sweep away the EU rules” (as you put it)?
  • How did some pro-Brexiters manage to argue that the EU was bad because it was protectionist, only now to advocate that the UK needs to adopt a more protectionist stance on trade to cushion it from the ravages of all those countries who prefer not to play fair in their trade practices?

At least you manage to identify correctly one group of folk that have brought us to this pass: the free market fundamentalists.  I don’t know if this represents the start of your journey towards acknowledging that much of what pro-Brexiters argued was — essentially — piffle, but I sincerely hope so.

Meanwhile all the adults in this country have to work with what we’ve got to raise every citizen’s standard of living across the board. But a problem is that pro-Brexiters still see pro-remainers’ persistence in pointing out the Brexit deceits as nothing more than their wallowing in self-pity. We would all find it much easier to work together once there’s an outbreak of honesty from pro-Brexiters about the mess they have created. Many of them, doubtless, felt it was genuinely necessary to create this mess for their ideology’s sake. But if so, Mr Franklin, please could you urge them to just fess up:  was that “the plan” all along?

Charles Hedges
Charles Hedges
3 years ago
Reply to  Kristof K

Britain plays cricket, we observe the spirit and letter of the law; a product of the Common Law which evolved out of consultation between the Ruler and The People (started under Anglo Saxon Monarchs and became a dictum of Ed I “That which affects all must be consulted by all” about 1285AD). Germany, France, Italy and Spain follow the golden rule; get away away with what you can: a product of Roman Law and Divine Right of Kings now adopted by the EU. Hence the late Queen Mother’s dictum ” One can never trust the Germans “.
The greatest deceit is by the Remainers, they said there would not be a loss of sovereignty when we joined the EEC- read P Shore’s Separate Ways.
The whole point of the EEC/EU is loss of sovereignty because democracy failed in these countries between 1918 and 1989.

Ian Barton
Ian Barton
3 years ago
Reply to  Kristof K

What reciprocal “fessing up” would you urge pro-Remainers to offer ?
Do you think the word “piffle” should be used in that offer ?

Last edited 3 years ago by Ian Barton
Dan Gleeballs
Dan Gleeballs
3 years ago
Reply to  Kristof K

“ How is it that Germany can subsidise its industry to the equivalent tune of 3 × the proportion of its GDP compared to the UK without having to “sweep away the EU rules” (as you put it)?”

It may be that Germany doesn’t have a fifth column bent on damaging the country at every turn. Sadly, Britain has. They’re still there too, flailing around in horror and spite.