{"id":585193,"date":"2025-11-21T18:22:16","date_gmt":"2025-11-21T18:22:16","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/585193\/"},"modified":"2025-11-21T18:22:16","modified_gmt":"2025-11-21T18:22:16","slug":"rachel-reeves-is-studiously-ignoring-the-cause-of-britains-woes-the-brexit-shaped-hole-in-the-roof-jonathan-freedland","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/585193\/","title":{"rendered":"Rachel Reeves is studiously ignoring the cause of Britain\u2019s woes: the Brexit-shaped hole in the roof | Jonathan Freedland"},"content":{"rendered":"

Imagine a family stuck in a house that constantly floods. The carpets are soaked, the walls damp. It\u2019s always cold, no matter how much they turn up the heating.<\/p>\n

The family try everything. They promise to replace the sodden carpets and find new, innovative ways to warm the house. Someone with a laptop wonders if AI might be the answer. But no one ever looks upwards and says: maybe we should just repair the giant hole in the roof.<\/p>\n

Britons are that family \u2013 and the giant hole in the roof is Brexit<\/a>.<\/p>\n

On Wednesday, Rachel Reeves will deliver her second budget, on which, it is widely assumed, the fate of an ailing Labour government depends. Recent weeks have brought conflicting signals \u2013 a rise in income tax rates floated, only to be reversed<\/a> \u2013 but there is one big thing we already know: the country does not have enough money to pay for all that it needs and wants.<\/p>\n

Every public service you can name is desperate for more cash. Take, almost at random, Britain\u2019s prisons: overcrowded, understaffed and saddled with boxes of paper records, a system so \u201carchaic<\/a>\u201d, according to the prisons minister, that as many as three inmates are mistakenly released each week<\/a>. It\u2019s the same story everywhere, from the NHS to the armed forces: we need more money than we\u2019ve got.<\/p>\n

Reeves will scrabble around to find a few billion, but none of those efforts will address the fundamental problem, which is that we are poorer than we should be, poorer than we were and poorer than our peers.<\/p>\n

Real wages have barely risen in 17 years<\/a>. Of course, the crash of 2008 was a global phenomenon, but we are struggling more than our counterparts to recover: indeed, for nearly two decades, Britain has experienced the biggest slowdown in productivity growth in the G7<\/a>. Reeves and Keir Starmer could see the problem when they arrived in office last year, which is why they made growth their paramount objective. But in Britain that is proving stubbornly difficult to achieve, no matter who is in Downing Street.<\/p>\n

Of course it is: there\u2019s a great big hole in the roof. This week, the economists John Springford and Andrew Sissons published a detailed analysis<\/a> <\/strong>examining the roots of the trouble. The UK\u2019s woes, they explain, stem from having too few internationally successful industries: \u201cIt means many places have too few well-paid jobs and too little income coming in.\u201d<\/p>\n

And why might that be? \u201cSince Brexit, [Britain] has been actively undermining its [own] economic model<\/a>, which is founded on openness to trade, ideas and people.\u201d<\/p>\n

Openness is the heart of the matter. Britain flourishes when it is open and trading, and shrivels when it is not. Brexit ignored that core economic reality \u2013 a defining fact about these islands \u2013 by making the UK less open to trade in goods, taking us out of a single market in which Britain had been in its element, trading freely and without friction to hundreds of millions of consumers. Naturally, and wholly predictably, \u201cBritain has fallen behind peer countries since it lost access\u201d, write Springford and Sissons, with the fall in goods exports draining more than one percentage point<\/a> from GDP each year.<\/p>\n

The picture is better in services, but even there, for long stretches of the Brexit era, the UK has lagged behind Germany, France, Spain and Italy<\/a>. Where once we might have relied on the money machine of the City<\/a> to plug the gap left by a declining goods trade, the finance sector has also been hit, losing its once disproportionately large slice of the market. Frankfurt, Dublin, Amsterdam, Madrid, Milan and Paris have all gained, as London has fallen behind. Incredibly, the capital, once the UK productivity engine that helped the rest of the country make ends meet, is now Britain\u2019s worst-performing region in terms of productivity growth. Given Brexit stripped the City of the easy access to EU clients it once enjoyed, that\u2019s hardly a surprise.<\/p>\n

Of course, the decision-makers know all this. Last month, the governor of the Bank of England warned Brexit would have a negative impact on the UK economy for the \u201cforeseeable future<\/a>\u201d. Previously, the Office for Budget Responsibility estimated that our departure from the EU would shrink Britain\u2019s long-term productivity by about 4%<\/a>.<\/p>\n

skip past newsletter promotion<\/a><\/p>\n

Sign up to Matters of Opinion<\/p>\n

Guardian columnists and writers on what they\u2019ve been debating, thinking about, reading, and more<\/p>\n

Privacy Notice: <\/strong>Newsletters may contain information about charities, online ads, and content funded by outside parties. If you do not have an account, we will create a guest account for you on theguardian.com<\/a> to send you this newsletter. You can complete full registration at any time. For more information about how we use your data see our Privacy Policy<\/a>. We use Google reCaptcha to protect our website and the Google Privacy Policy<\/a> and Terms of Service<\/a> apply.<\/p>\n

And yet, our leaders continue to work around these glaring facts as if they weren\u2019t there \u2013 like the family wringing out the drenched carpets, studiously ignoring the hole in the roof above their heads. True, Reeves did at least mention Brexit as one of the causes<\/a> of the fiscal bind she finds herself in, adding that the government was \u201cunashamedly rebuilding our relations with the EU\u201d to improve the situation.<\/p>\n

Would that that were the case. Instead, Labour has made only tentative steps in that direction. The much-vaunted trade deal agreed with the EU<\/a> is forecast to yield \u00a39bn by 2040. Better than nothing, but for an economy whose value is measured in the trillions, it\u2019s small change.<\/p>\n

No, if Britain wants to remedy the ailment that has made it the sick man outside Europe<\/a>, it needs to be bolder. Rejoin the single market for goods, urge Springford and Sessions. It\u2019s not as if we want to regulate goods much differently anyway, so any sacrifice of supposed sovereignty is negligible.<\/p>\n

If that medicine seems too strong, then why not re-enter the customs union? Being on the outside is estimated to be costing us up to \u00a330bn a year<\/a>, the kind of money that could really come in handy. Admittedly, Labour\u2019s manifesto ruled out such a move, but Reeves was seemingly ready to break her pledge on tax rates \u2013 and a U-turn on the customs union would cause a fraction of the political damage. Besides, it could be embedded in a larger argument: that given the straitened times, and the threat posed by Donald Trump\u2019s tariff attack on the global trading system, it is a necessity born of a radically altered situation.<\/p>\n

The point is, tinkering won\u2019t cut it. Seasoned Europe-watchers explain<\/a> that EU officials, many of them shaped by years of attritional Brexit talks, respond to timid, footling proposals from the UK in kind. But if Britain were to be more ambitious, seeking a genuine and bigger reset \u2013 putting \u201cmore cards on the table<\/a> to build political momentum\u201d, as former foreign secretary David Miliband put it this week \u2013 then heads of government are more likely to push the Brussels bureaucrats aside and get stuck in, forging with Britain a new deal that could be much more profitable for everyone involved.<\/p>\n

Again, it is a case that could be made forcefully and that much of the British public would accept \u2013 that the world of 2026 is entirely different from 2016, that the old red lines no longer make sense and that Brexit was a waste of money that, now more than ever, we simply cannot afford.<\/p>\n

I don\u2019t expect Reeves to say any of those things, but she should. Charged with stewardship of the public finances, she needs to point to the obvious source of so much of our trouble. We blew a hole in our roof a decade ago \u2013 and it\u2019s long past time we fixed it.<\/p>\n