LONDON — The UK’s economy is well-shaped to deal with Brexit and the real threats to economic stability come from elsewhere in the EU, according to prominent pro-Brexit economist Roger Bootle.
Bootle is managing director of economic research consultancy Capital Economics and known for his bullish stance on Brexit, describing himself as a “mega-optimist” with regards Britain’s after leaving the EU.
“The economy is not that bad, but pessimism sells better than optimism,” he told an audience at the Retail Week Live conference on Wednesday.
“You could be forgiven for thinking that the UK is going to hell in a handcart — well, it isn’t. Things are actually looking pretty good,” he said, adding that a raft of negative forecasts about Britain’s prospects after the June vote had already been proven wrong and revised upwards.
The EU is “fading” in importance
The EU Single Market is the UK’s largest export market, with around 44% of British exports in goods and services heading other countries in the EU in 2015.
However, Bootle said that trading figure has fallen consistently as trade with other countries has increased at a faster rate. That trend is set to continue as part of what he called Europe’s “fading” influence. The European Commission itself predicts that “over the next ten to 15 years, 90% of world demand will be generated outside Europe.”
He said that the single market was, in fact, a “disaster” for member countries’ trading prospects.
“The EU is appallingly bad at doing trade deals — it has 28 member countries which all have to agree trade deals.”
He said an incident last year in which the Belgian province of Wallonia almost derailed a major EU-Canada trade deal demonstrated that the inherent problems of arranging multi-lateral trade deals.
“I’m very confident the City will do well”
Bootle said he was confident that the City of London — which contains the bulk of Britain’s vital financial services sector — would continue to thrive after Brexit, and said numerous threats from banks to relocate to continental Europe were overblown.
“I’m very confident that the City will do well,” he said. “Various people — City bigwigs — trying to get some sort of handout suggested that they were all going to decamp to Paris or Frankfurt.”
He said that moving to either destination — the two most commonly-touted post-Brexit alternatives for banks and financial services firms — was unfeasible.
“Decamp to Paris and pay François Hollande’s taxes or face a [Marine Le Pen] National Front government? Or Frankfurt? More people work in financial services in London than live in Frankfurt,” he said.
The value of the pound crashed after the Brexit vote and remains historically low against the dollar and Euro, which has begun to driven up inflation and squeeze British income levels.
Bootle said, however, that the pound’s drop in value would make it competitive and boost exports.
“The pound is now at a competitive level. This is tremendously important. It is going to help Britain absorb the Brexit shock and it’s going to help correct the balance of payments,” he said.
The argument for the benefits of a weakening pound is that it would help shrink Britain’s current account deficit as a result of strengthening exports, and because cheaper goods and services will be swapped for more expensive imports.
Bootle said that the biggest risks to British businesses come from the unpredictable leadership of US President Donald Trump and from problems in other European countries, including the potential election of far-right leaders Geert Wilders and Marine Le Pen in Holland and France respectively, as well as the debt-ridden economies of Italy and Greece.
“Should you all be worried? It’s going to be bumpy, but this is the Great Escape — we’re going to do extremely well,” he said.