Two years after the Brexit vote, the UK population is as divided and as shocked as it was immediately after the results were announced, if not more so. The difference is that the negative economic consequences of the vote are in sharper focus.
This past weekend, huge pro-Remain demonstrations in London demanded a “people’s vote” on any type of deal that the government may reach with the European Union. At the same time, Leave supporters seem to be as adamant as ever that Britain’s place is firmly outside the EU and that “no deal is better than a bad deal.”
But there has been a subtle shift in their attitude. Even Nigel Farage, the former UKIP leader who before the referendum claimed that Britain would simply be better off outside of the EU, last week said in an interview on ITV: “Brexit done properly will make this country richer. Brexit done badly will leave us in a worse position than we were before.”
It is not clear what he meant by “done properly.” In 2016, Nigel Farage told “The Mirror” newspaper in an interview: “No deal but continuing under WTO rules would be better and cheaper for this country than where we currently are. The worst case possible scenario is better than where we are today.”
He was also among those who dismissed as “Project Fear” the warnings from various experts that the UK would be hit hard if it leaves the EU.
For the moment, the Leave side has found a way to deal with the negative consequences: simply blame the EU, saying that the “faceless bureaucrats” in Brussels are “punishing” Britain for leaving. This seems to work, as even some Remain supporters I’ve spoken to are ready to believe it.
Whatever side of the Brexit debate you’re on and no matter whose propaganda you choose to believe, there is no escaping the fact that Britain’s future outside the EU is more uncertain than inside. The “hostile environment” for immigration that the Brexit vote has created will end up hurting the country in the long run.
As many other countries, the UK is confronted with the challenge of an ageing population. A white paper by the World Economic Forum highlighted in last week’s “Thoughts from the Frontline” newsletter from economist John Mauldin shows the UK’s shortfall in retirement savings was $8.0 trillion as of 2015.
That is the difference between what people expect they will get when they retire and what the current resources of the country ensure they will actually get. Of these, almost three quarters, or $5.9 trillion, was the shortfall in the unfunded government pillar 1 (compulsory) pensions and public employee pension promises. Of course, the UK is not alone in its predicament. Here is a graphic summarising the WEF white paper findings:
Source: WEF, Mercer analysis
For those curious how the shortfall was calculated, here’s a brief summary: The WEF experts assumed that most people will get retirement revenues from three sources — government pensions, employer pensions and individual savings.
They then analysed publicly available data on these and compared the level of savings across them with expectations of average retirement income needs and life expectancies. They assumed that people will continue to retire between the ages of 60 and 70.
The UK’s savings shortfall is projected to increase by 4% a year and hit $32.8 trillion by 2050. As a reminder, the country’s GDP is somewhere around $2.6 trillion. This shortfall suggests Britain needs a lot more, rather than a lot fewer, of the kind of hard-working migrants from Eastern Europe the population voted against.