Cementing Britain’s Economic Decline: The Plan for EU Convergence

The current government's economic policy was growth. Having failed to bring growth to the UK economy it has revived ‘Project Fear’ to blame its economic failure on Brexit. As a result, Sir Keir Starmer refers both to the supposed claim by the Office for Budget Responsibility (OBR) that Brexit would cost the UK 4 per cent of GDP, and to an ‘independent’ study claiming the cost is 8 per cent. This 8 per cent is now bandied around as gospel truth by those who want to rejoin the EU, who include the Chancellor, Rachel Reeves. But the basis was and remains flawed.

The OBR did not make the claim in such terms. The OBR posited a lower rate of growth in productivity after Brexit, which would translate into lower GDP growth. A problem with productivity has occurred, and indeed a fall in productivity, not just a fall in its rate of improvement: this was due to Covid-19 and is concentrated in the public sector, which does not trade with the EU.

As John (now Lord) Redwood has explained, the OBR report was a forecast based on the unproven assumption of a lower rate of improvement over 15 years in UK productivity, of ¼ per cent per annum less than if the UK had not left the EU.

Those who use the figure are unable to explain either the timing, cause, or materiality of the supposed drop. The 4 per cent has been discarded in favour of the more dramatic 8 per cent, not least because we are seven years into the lifetime of the OBR’s forecast (2019-34), Covid-19 has intervened, and it is not possible to track whether Brexit alone has precipitated changes in the rate of UK productivity growth.

This new claim derives from Working Paper 34459 of the National Bureau for Economic Research, based in Cambridge, Massachusetts. The study wrongly includes the impact of Covid-19 and other events, and compares the UK to the average of a range of other countries, in which the USA is heavily weighted. UK economist Julian Jessop has explained that the evidence on which the study is based is thin and the methodology problematic. The NBER used data for 33 advanced economies (including the EU27, the US, Canada, Japan, Iceland, Norway, and Switzerland) from 2006 to 2025, applying five different approaches, four of which used data from all 33 economies, using differently weighted averages, a fifth using a ‘synthetic control model’, the ‘most sophisticated version of a “doppelgänger”, where a computer algorithm is left to pick the weighted average of a subset of countries’ where economic performance most closely matched that of the UK before 2016.
The UK’s performance is actually deficient compared to the USA, not to EU countries.

EU performance has broadly tracked UK performance and claims of lost GDP mask the fact that the EU and UK economies continue to follow a similar model. They cannot be ‘high growth’ when authorities intervene through high regulation and their own public policy objectives, limiting the scope for the free market, which limits opportunity for success and risk of failure. It is a ‘securonomics’ model, in which the authorities – not buyers and sellers – are the dominant market actor.

The model entails protectionist obstacles with high entry barriers to new competitors and to new products/services, a large public sector, generous social benefits, high taxes, and an expanding state-directed sector. The UK’s state-directed sector comprises the nominally private market actors whose businesses respond to public policy objectives such as are laid down in the government’s Industrial, Infrastructure, and Clean Energy strategies.

There is a build-up of shadow debt behind these strategies. This follows exactly the EU model of the InvestEU programme.

A public sector of 45 per cent of the economy is added to a state-directed sector of 10-15 per cent, leaving only 40-45 per cent as private sector, and even then the private sector is subject to a myriad of regulations. The model involves high costs generally, and a high cost-of-living. The private sector and wealth creation are progressively squeezed out. An inexorable build-up of debt is the safety valve used to mask chronic underperformance and lack of wealth creation.

The UK economic model scarcely diverged from the EU model between 2016 and 2024, and it has become a replica of it since the 2024 general election. The latest proposed reconvergences will involve participation in new EU shadow debt schemes for defence spending, and the re-entry of certain industry sectors into the EU Single Market for that sector.

We are planning to reconverge with the EU’s low-risk policies and protectionist rules – which inhibit the risk-taking necessary for entrepreneurial success – and its low-return economic system, which is enforced through the Single Market/Customs Union, the euro, and the wide set of Regulatory Technical Standards, Directives and Regulations.

Joining any one element makes a country effectively subject to all of it, and locks that country into sclerotic GDP growth, not an acceleration.

The EU model is high-cost for businesses, and entails a high cost-of-living for citizens – who in this country voted to leave the EU and this model. It is wrong and economically illiterate for the Prime Minister to indicate that realigning with the EU can do anything to reduce the cost of living in the UK or spur economic growth.