Should the UK walk away from the Single Market

What have been the benefits of the Single Market for the UK? This is the fundamental question facing negotiators, commentators and interested observers of Brexit, and has never been answered convincingly.

The opinions of former Prime Ministers, both Labour and Conservative, are worth little since none of them ever asked any government department to monitor and measure the benefits. Nor of course can we accept the confident claims of Tim Farron, and Nicola Sturgeon since they haven’t collected any evidence either. And surprisingly, we cannot even believe the views of the CBI and other trade federations, for though we might expect them to have measured for their members, none have done so.  

The opinions of former Prime Ministers, both Labour and Conservative, are worth little since none of them ever asked any government department to monitor and measure the benefits. 

We are compelled therefore to look for the answer for ourselves in the major world databases of the OECD, UNComtrade, the IMF, the WTO, UNCTAD, the ITC and the World Bank. The results of my own searches are presented in a new Civitas report It’s Quite OK to Walk Away, published last week. It paid particular attention to the growth of UK exports, since they, above all else, were expected to benefit from membership of the Single Market. Those who want the UK to remain in the Single Market assume that they have done so.

They haven’t.  The goods exports to the EU 12 of 14 larger countries (excluding China) trading under WTO rules over the years 1993-2015 have grown at a compound annual growth rate of 1.93%, almost twice as fast as the 1% rate as those of the UK. The Single Market has been era of very slow growth of UK exports to other members, due in part perhaps to the failings of UK exporters, but their exports to the rest of the world, mainly under WTO rules, grew at a rate of 2.9% or nearly three times as fast.

The goods exports to the EU 12 of 14 larger countries (excluding China) trading under WTO rules over the years 1993-2015 have grown at a compound annual growth rate of 1.93%, almost twice as fast as the 1% rate as those of the UK.

Much the same is true of services. Over the years 2004-2012, the most recent years for which we can get a matched comparison, the exports of 27 non-members grew at an annual rate of 3.7% which is faster than that of 27 members exporting to each other which was only 3.2%. Over the years 2000-2014, UK services exports to the rest of the world grew twice as much, twice as fast and ended more than three times larger than those to fellow EU members.  

Data on productivity growth and the impact of EU’s world-wide trade agreements, also show that the benefits of Single Market membership have, over many years, been vastly exaggerated in the UK.

If an EU-UK free trade agreement is not agreed, and the UK decides to walk away, the experience of numerous exporters from non-member countries shows that trading with the EU under WTO rules is no great disadvantage, and is not incompatible with high rate of growth of exports. It is also, of course, free of charge and unwelcome political constraints.