IT took the brief disappearance of Marmite from the shelves of Tesco, Britain’s biggest supermarket chain, to bring home to people the true cost of Brexit. Marmite, of course, is the yeast extract that for years has been the favourite spread for toast in British households. It is supplied, together with a host of other popular brands of edibles and cleaning products, by Unilever, the Dutch multinational.
All these products went out of stock at Tesco because Unilever wanted to raise their price by 10 per cent, and the supermarket chain refused to pay. The reason for this escalation is the ongoing fall in the value of the pound post-Brexit. Since June 23, the date of the referendum on leaving the EU, the pound has fallen 18pc against the dollar. In a so-called flash crash, it plunged 6pc in a few minutes before recovering. Although Tesco’s dispute with Unilever has now been resolved, higher prices are clearly on the cards.
Thus far, those who had voted to leave the EU had gloated in the evidence that none of the dire forecasts about the economic disaster that would befall Britain had come true. Indeed, the stock market index, the FTSE, has risen steadily, and the housing market has held steady. So pro-Brexit pundits have had a good time sneering at those Remain experts who had warned against leaving the EU.
Now, for the first time, Brits are learning the true cost of voting to cut off their links with the world’s most successful trading bloc. Soon, petrol and food prices are predicted to rise as all imports will cost more since they are mostly priced in dollars and euros. But a weaker pound has also boosted exports and attracted a record number of tourists who find shopping on Oxford Street a lot cheaper when they change their dollars and Euros into pounds.
One reality that many Brexit proponents have conveniently overlooked is that Britain consumes more than it produces, and imports more than it exports. The shortfall has been made up by the continuing popularity of the UK as a place for foreigners to buy property. For now, houses and flats in London cost less in dollar terms, making them an even more attractive proposition. But should perceptions change, this cushion will evaporate quickly.
And while a weaker pound does boost exports in theory, you have to manufacture goods to sell abroad. Over the years, manufacturing has fallen sharply, and even the things carrying the Made in UK label are often assembled from imported parts. So car manufacturers might have to pay duty on parts they bought without tariff restrictions from other EU countries.
And this is the crux of the increasingly acrimonious debate over Brexit being conducted in parliament as well as in the media. Currently, the high court is hearing a case challenging the government’s position on Brexit. A group has questioned the ruling party’s right to leave the EU without an act of parliament. The government insists that the referendum result gives it the mandate to invoke Article 50 of the EU charter that triggers the negotiations leading to Britain’s exit.
What Theresa May is offering in place of a detailed debate on its bargaining position is a vote to annul the 1972 Act that led to Britain’s accession to the Union. But a reinvigorated Labour party, supported by a group of Conservative members, insists that the government mandate does not include the terms of divorce. The government fears that many of its own party members would side with Labour on a vote to leave the EU.
May made her own intentions clear in a speech to the recent Conservative conference where she spelled out that Brexit means restrictions on foreigners entering Britain. This caused an immediate drop in the value of the pound as investors interpreted May’s position to be in favour of what is termed a ‘hard Brexit’. Basically, most European leaders are clear that if Britain wishes to retain access to the EU free market and trade as it did pre-Brexit, then it would have to accept the principle of free movement of people. This, of course, is anathema to most of those who voted to leave.
Although it has put a brave face on it thus far, the government is caught on the horns of a dilemma: if it opts for a ‘soft Brexit’, it would antagonise its supporters; and if it goes the other way, it risks serious damage to the economy. As it is, Brexit has caused companies to put their investment plans on hold, pending the result of the coming negotiations after Article 50 is invoked. Nissan, a major Japanese car manufacturer, has demanded assurances from the government that any losses arising from Brexit would be made good if the firm is to continue manufacturing in Britain. May has promised to shield the company from any adverse effects arising from Brexit.
So Britain finds itself in a legal, constitutional and economic mess, thanks to the dishonest campaign run by Brexit supporters led by Boris Johnson who has now been elevated to the unlikely position of foreign secretary. One of the most misleading promises he and his colleagues made was that the money the UK paid into the EU coffers would be spent on National Health Service, a highly respected public service currently suffering from a dire shortage of funds. In fact, Johnson’s ‘Brexit Bus’, the bright red vehicle he toured the country in while campaigning for the Leave side, bore a large sign declaring that the 350 million pounds sent to Brussels every week would be spent on the NHS. Since June 23, however, Brexiteers have distanced themselves from this pledge.
Another dismal fallout from Brexit has been the spike of violence and abuse directed towards foreigners. Several East Europeans have been attacked, and two killed in apparent hate crimes. The common refrain post-Brexit is “Why are you still here?”
Brexit may be the most spectacular own goal in recent history. The possible election of Trump would be the next most costly error. The difference is that the tenure of the American president is four years; Brexit is forever.
Published in Dawn October 17th, 2016