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Brexit Britain may soon find itself sinking faster than Venice

William Keegan
<span>Photograph: Manuel Silvestri/Reuters</span>
Photograph: Manuel Silvestri/Reuters

One of the privileges of my trade is that the best seminars often take place in the best places. I no longer attend the Davos World Economic Forum but last weekend marked the 25th annual seminar for British and Italian journalists hosted by the Italian government in – well, Venice.

Before I left, several people asked why I was going, because pictures of Venice under water had been flashed around the world. “Climate change, global warming” seemed to be the general verdict.

However, the climate crisis should not be confused with the tidal pattern that Venice has experienced for centuries – duckboards make a regular appearance when the high tide comes in.

Venice, like so many places, is unquestionably vulnerable to the climate crisis, but I can report that the streets were clear of water and duckboards last weekend. Instead of worrying, as they usually do, that there were too many tourists, the city authorities were actually expressing concern that the bad publicity had damaged the tourist industry.

The Venice seminar embraces many political, diplomatic and economic issues, but regular readers will not be surprised that, for me, one of the most interesting aspects was the sadness the Italians present expressed about the UK’s departure from the European Union.

Last year, the hope was that this country would have second thoughts and recognise how much it stood to lose by honouring a referendum result that principally reflected dissatisfaction with many things other than the EU. This year, the mood was that we all had to make the best of it, given the long history of close ties between the UK and Italy over centuries.

Italy, of course, was a founder member of what was then the European Economic Community. It was not for nothing that the 1957 treaty was signed in Rome. Italy joined the European exchange rate mechanism in 1979 when the UK declined. It also joined the eurozone – the single currency – in 1999.

Both decisions were, to my mind, justified more by political than economic considerations. Because the country had a chronically higher inflation rate than Germany’s, it used to benefit from the freedom to devalue the lira from time to time, in order to maintain its price competitiveness against the Deutschmark in export markets.

It is a not-very-well-kept secret that, quite apart from any other problems, the growth rate of the Italian economy suffered for a long time from this loss of exchange rate flexibility vis-a-vis other EU countries. There is little doubt that this was one of the factors behind the rise in Italian populism and the desire of populist parties to leave the eurozone. But I get the impression that the powers that be think – or at least want to believe – that the economy has to some extent adapted to the rigours of the eurozone and been showing some resilience.

The government’s own internal studies and analysis point to a severe threat from abandoning the single market

Which brings me back to this benighted land that has been captured by the Brexiters. Is this economy going to show some resilience in the face of what, frankly, I still regard as a potential economic catastrophe? In my last column I expressed the hope that Boris Johnson would see sense, ensure that this would be “Brexit in name only” and that we should, in our own interest, keep close to the customs union and the single market after this year’s transition period.

But the new chancellor, Sajid Javid, has abandoned the sensible close alignment policy of his predecessor, Philip Hammond – that seems such along time ago! – and has proclaimed: “There will not be alignment, we will not be a rule taker, we will not be in the single market and we will not be in the customs union.”

The government’s own internal studies and analysis point to a severe threat from abandoning the single market, which was one of the key attractions for foreign companies, not least the Japanese, to invest in those parts of the Midlands and northern England where “getting Brexit done” has proved such a compelling slogan. (By the way, there is nothing new about working-class people voting Conservative!)

On the face of it, the Johnson/Cummings government wants to address those discontents which, ironically, brought it to power via Brexit. Dominic Cummings, Johnson’s chief adviser, wants to end austerity, improve the NHS and satisfy the so-called left behind.

Let us hope they can do this. But it is a mammoth task when they are simultaneously making the country poorer. Already a study by Bloomberg finds that the cost to the economy of the very approach to Brexit taken over the past three years has equalled the entire accumulated cost of our contributions to the Brussels budget – contributions that often flowed back to us via funds from the European Investment Bank.

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