London Daily

Focus on the big picture.
Saturday, May 31, 2025

Britain has won the biggest Brexit prize of all

Britain has won the biggest Brexit prize of all

In the end, the fish were only of symbolic importance. Neither does it matter that much what happens to Scottish seed potatoes, no matter how much of a fuss Nicola Sturgeon kicks up.
Farming, tariffs and quotas are of relatively little importance given that the exchange rate will simply adjust to compensate for any changes that are made. As the UK and the EU finally agree a trade deal, there was one victory that really mattered: regulatory divergence.

And on that the UK appears to have secured a victory. Leaving aside the diehard, swivel-eyed campaigners on both sides of the debate – and we have probably heard enough from them for any sane country over the last four years – the economic impact of leaving the European Union was always finely balanced.

Extra trade friction would mean we would lose some exports to the EU, but since they were falling anyway – and we had a huge trade deficit with the rest of Europe – that hardly amounted to much. Against that, we would save on contributions to its Budget, but given the vast scale of state spending it was not that big a deal. Net-net EU membership was never that crucial to the British economy.

There was one big prize, however. Over the last two decades it has become clear that the EU is not so much an over-mighty regulator as a really bad one. Mainly because it is bureaucratic and un-democractic, and often under the sway of the lobbyists who spend billions in Brussels every year, it has become more and more intent on clamping down on every form of innovation.

That could be seen most clearly in the internet and app economy. It became increasingly hard to believe that Europe’s dire performance against the American and now Chinese giants had nothing to do with the way the industry was crippled by its regulators. But it crept into every area of the economy, from finance, to legal and professional services, to intellectual property. If it was new, innovative and entrepreneurial, the EU either banned it, broke it up, or burdened it with so many costs it was impossible for new companies to get going or to scale up when they did.

The EU was demanding a degree of regulatory alignment from the UK that would have meant we had to stick with every wealth-destroying directive coming out of Brussels. Under-performance in the industries that matter most would have been built into the system.

That has rightly been resisted. We will now be able to embrace technologies from artificial intelligence, to driverless cars, flying taxis, lab-grown meat and vertical farms (oh, and vaccines, which the EU seems very slow to approve, even amid a pandemic).

It will take time, but with regulatory divergence the UK will steadily pull ahead of rivals such as France and Germany which you would normally expect to perform as well as, if not slightly better, than the UK.

We will be more innovative, attract more capital, and our companies will seize markets more quickly, than they otherwise would have done. We have seen the United States do that in technology, and now Britain will be able to match it. That is a prize worth having, and it has been secured.
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