I am not an economist but when I stumbled across an interesting article by Eurostat on the size of the GDP for the EU-28 versus the global economy, I was impressed. (Figures accurate for 2014 and these may change). The interesting bits of information I gleaned from this article are:
1) The EU (including the UK) has the highest share of global GDP, at 23.8%!
2) The second largest is the USA at 22%.
The UK has been trying for a decade or more, via the EU, to reach a trade agreement with the US (recently killed off by the current US government). Many in Europe did not want an agreement to happen if it meant lowering standards to accommodate the US that would not be in Europe's interest. Still the US does masses of trade with us. Think Apple. Think computers. Think consultancy and accounting services. Think mutual investments interests.
Adding together the EU’s 23.8% and the US’s 22.2%, these currently close trading partners represent nearly half of the worlds GDP. With Brexit on the agenda we are choosing to move away from the 50% of the world with similar values to us, and a long history of trading relationships, to potentially create trade agreements with the rest of the world (in more fragmented parts). On the flip side perhaps we could increase our trade with China either through the EU or alone in the post-Brexit world. I am not saying this is necessarily a bad thing but we should be wary of admiring the green on the other side at a cost of losing our global leadership in:
- Financial services: banking, insurance and exchange trading (e.g. Euro trading)
- Automotive design & production for Europe (Japanese & other investments)
- Technology innovation for Europe (Big Data, Blockchain, AI, Machine Learning, RPA, etc.)
- Global business schools and allied globally recognised educational and research institutions, EU collaborative investments in areas such as CERN, the European Space Agency, etc.
Added to these we should expect further losses in
- Legal services income from abroad, with government paid (ie tax-payer funded) and expanding multi-billion costs for our so-called divorce (including short and long term legal costs),
- An expected payment to the EU to finalise lost revenues, and the opportunity of seeing what relationship we will have in the future with EU-27.
- A total lack of planned investment in the NHS, one of the cheapest and most successful health systems globally. With lower UK GDP post Brexit, this may be at further risk.
- A weakening pound and increasing costs (higher inflation) have affected millions directly in their pockets already. As usual the poorer in the community are hurting most.
- The aviation sector is reliant on access to hundreds of locations across Europe. Without a structured arrangement with the EU, Brexit creates a big challenge to the industry and risks adding to the already higher costs of UK citizens travelling abroad.
As I write this, Brexit talks have started. None of it makes sense to me. Europe needs to change but walking away from it is like the Queen, fed-up with the weakness of our democracy in the UK, packing her bags for Canada or Australia as she feels she would get a better deal in one of those countries! Should we stay and lead? Perhaps it’s not too late.
(Article describes the personal view of the author and not that of the company or parent or affiliate companies)
The EU-28 accounted for a 23.8 % share of the world’s GDP in 2014, while the United States’ share was 22.2 % (see Figure 1); note these relative shares are based on current price series, reflecting market exchange rates. The Chinese share of world GDP rose from 4.5 % in 2004 to 13.4 % in 2014, moving ahead of Japan (5.9 % in 2014). To put the rapid pace of recent Chinese growth into context, in current price terms China’s GDP in 2014 was EUR 6.4 trillion higher than it was in 2004, an increase higher than the combined GDP of the eight smallest G20 economies in 2014 (Australia, South Korea, Mexico, Indonesia, Turkey, Saudi Arabia, Argentina and South Africa).