The Remain Zombies Pantomime
Why the NBER paper, Ed Davey's Customs Union and Dr Dunlop are wrong about UK trade.
Last week saw another return of the Remain Zombies, this time in the form of
1. An article by the Telegraph’s resident Remainer, Jeremy Warner, calling Brexit an unmitigated failure, although his only evidence was an NBER working paper that has not yet been sent to peer review but is being quoted as gospel by Remainers who haven’t read it.
2. An appearance on BBC Breakfast by Ed Davey promoting his plan for a UK-EU Customs Union, claiming Brexit had caused UK trade to fall dramatically.
3. And Historian, Dr Tessa Dunlop, shouting me down on GBNews, claiming that Brexit had caused the UK to trade with China.
I have been writing about all of these issues for years now, but somehow, trade reality isn’t sinking in. A friend suggested that I simplify the answers so that Remainers can understand them. I have decided that if the words and numbers are too confusing, I will try pictures this time and see if this gets through. I am using free databases from the World Bank, the ONS, and the ITC Trade Map, so there is no excuse for people not to look this stuff up. I am also using all available data, so there can be no claims of cherry-picking.
1. UK GDP would be 6% to 8% higher if it hadn’t left the EU. Oh, no, it wouldn’t!
The Abstract of a working paper by the NBER states that ‘Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time.’ It is hard to believe that anyone believes this. If they do, they have obviously not looked at EU economic data recently. None of the other large EU Member States has outperformed the UK by 6% to 8%, if at all. The paper uses a lot of econometrics, but it seems to assume the EU has remained static since Brexit, and some of its data sources end in 2023, even though it is almost 2026. But the appearance of numbers and econometric formulas seems to be enough to scare off any serious evaluation of the paper by journalists. So I am going to attempt this with pictures.
Below is a chart from the World Bank’s free database and graphing webpage. The first graph can be found here: GDP (constant 2015 US$) - Germany, France, United Kingdom, Italy, Netherlands, Spain | Data
Graph 1:
You will notice in Graph 1, above, that there is no significant difference between UK GDP and those of the other large EU member States: Germany, France, Italy, Spain, and the Netherlands. The UK outperformed all of them except Germany before Brexit, and the UK has continued to outperform all of them except Germany after Brexit. If anything, the UK’s GDP is now closer to Germany’s, simply because German GDP has been flatlining since 2022, when it lost access to the Nord Stream (Russian Gas) pipelines. There is no reason to believe that UK GDP would have suddenly and inexplicably increased by 6% to 8% had we stayed in the EU. None of the other EU countries’ GDPs has increased by this amount.
If you prefer to measure GDP in purchasing power terms, Graph 2 below, shows that the UK and France have been moving in sync since 1990, and have continued to do so since Brexit. Again, if anything, the UK is closer to France now than ever before. It is very hard to see how Brexit has caused the UK economy to be 8% lower than it would have been had we stayed in the EU.
You can find graph 2 here: GDP, PPP (constant 2021 international $) - Germany, France, United Kingdom, Italy, Netherlands, Spain | Data and you will be able to remove the labels and see the merging of UK GDP, PPP with France more clearly.
Graph 2:
Spain, Italy and the EU recovery fund
If you think that Spanish and Italian GDPs appear to be performing better than the UK’s, you should consider how much money they have received in EU funds.
Italy was the largest recipient of the EU’s Recovery and Resilience Facility, part of the NextGenerationEU (in the UK, known as the EU’s Covid Recovery Fund), and Spain was the second-largest recipient. Italy received €191.5 billion, Spain received €163 billion, Poland received €59 billion, France received €40 billion, Greece received €36 billion, and Germany received about €28 billion.
The Recovery and Resilience Payments are part grants, repaid by the EU, and part loans to individual countries from the EU Commission. Technically, the loans are 30-year bonds, but countries have until 2058 to repay them. The EU borrowed the funds used for both the grants and the loans, collectively, by issuing EU bonds in the capital markets. The EU will repay the borrowing over time from the EU budget, which is funded by member states’ contributions and the EU’s new ‘Own Resource’ taxes, such as the EU CBAM and the plastics levy.
Besides the recovery fund money, Spain has always been a net recipient of EU redistribution since it joined in 1984, as have most of the Eastern EU countries since they joined. This has enabled poorer EU countries to rebuild their economies at the expense of richer ones, such as the UK.
In contrast to Spain, the UK was never a net recipient of EU funds while a member, even in 1976, when it sought an IMF bailout. The EU even gave UK companies subsidies to move their factories to Eastern EU countries. Did NBER consider this in their working paper? For example, did their trade calculations include the number of JLR cars now imported into the UK from factories built with EU subsidies in Slovakia and Austria? Did they consider how much more damage EU subsidies to relocate UK factories would have done to the UK economy if we had remained a member? Were these counterfactuals even considered?
Did the NBER economists consider the amount of money the UK would have had to contribute to the EU and the EU Recovery and Resilience Fund in their analysis? Did they consider how UK money (paid via EU funds) has helped some of the smaller EU economies that the NBER paper then used as comparators to the UK? This money could have been used to rebuild UK infrastructure rather than being used to rebuild Eastern Europe. Another counterfactual NBER didn’t consider. Maybe their next paper should be: how much better off would the UK be if it had never joined the EU?
The 25,000 EU Regulations and Directives the UK avoided
Graph 3.
The NBER working paper appears to assume that the EU today is exactly the same as the EU the UK left in 2020. It isn’t. The EU’s economy is stagnant due to its reliance on Russian gas and its inordinate number of regulations and directives imposed since Brexit. A number that shocked Europhile Mario Draghi, who wrote a lengthy report on this problem in 2024: The Draghi report on EU competitiveness. Although no one in Brussels appears to have taken the report seriously, since then, the EU has introduced another 2,000 regulations but almost no Directives.
Did the NBER authors consider the many regulations the UK would have been forced to comply with if it were still a member of the EU? The UK is predominantly a service economy, but the EU is stifling many of the industries in which the UK excels.
The graph above (Graph 3) is easy to create because EU regulations and Directives are numbered in sequential order. The first number is the year the regulation came into force; the second is the regulation’s sequential number for that year. For example, Regulation 2023/1115 is the 1,115th regulation made in 2023.
The UK has been able to avoid adopting EU regulations since 2020, meaning we have missed out on 15,196 EU Regulations and 9,148 EU Directives, so far. 2025 isn’t over yet! (See Graph 3.)
The EU ‘Directives’ are not direct EU laws (Regulations) but require each EU Member State to pass its own implementing legislation. This allows a lot of ‘Gold Plating’. The EU is now moving away from Directives; hence, just 25 have been issued in 2025 (this amount is not visible on Graph 3 as it is so small compared to previous years). This is a deliberate move by the EU: EU Regulations are directly binding in all member states, without requiring national laws, ensuring faster implementation and uniformity of the law across the EU.
The NBER paper authors should understand that there is no way that the UK economy would be 6% to 8% larger if UK companies had been forced to follow all of these laws. The EU has also passed ‘Acts’ that would have stifled UK growth, such as The Digital Services Act (DSA), entered into force on November 16, 2022; The Data Act, entered into force on January 11, 2024; and The Artificial Intelligence (AI) Act, which entered into force on August 1, 2024.
Below is a list from the USTR report of EU regulations that limit EU trade with the US that have come into effect since the UK left the EU:
Regulation (EU) 2024/1143 governing the scope of protection and enforcement of Protected Designations of Origin (PDOs) and Protected Geographical Indications (PGIs), including expansive rules about evocation, extension, co-existence, and translation, among others.
Regulation (EU) 2021/2117, compulsory nutrition declaration and list of ingredients to be displayed on the label of wine products sold on the EU.
Regulation (EU) 2022/1616 on recycled plastic materials and articles intended to come into contact with foods
Regulation (EU) 2024/1860 regarding a gradual roll-out of the European database for medical devices called EUdamed. (I assume this name doesn’t translate well, or it was a Freudian Slip.)
Implementing Regulation (EU) 2024/399, which amended model health certificates for entry into the European Union of consignments of certain products of animal origin and certain categories of animals.
European Commission Implementing Regulation (EU) 2021/2090 in the EU Official Journal denying the authorisation of titanium dioxide (E171) as a feed additive for all animal species.
Regulation (EU) 2022/63 prohibited titanium dioxide (E171) as a food additive
Commission Regulation (EU) 2023/334 to reduce maximum residue limits (MRLs)
Eco-design for Sustainable Products Regulation (Regulation (EU) 2024/1781)
Regulation (EU) 2025/40 on packaging and packaging waste
Deforestation-free supply chain regulation (Regulation (EU) 2023/1115)
Regulation (EU) 2024/3234 delaying the implementation of 2024/1115.
European Commission Delegated Regulation (EU) 2023/707
Fluorinated Greenhouse Gas (F-Gas) Regulation, (EU) 2024/573
I am sure that if the NBER paper’s authors had reviewed EU Regulations introduced since Brexit, even they would reconsider their conclusions. Did they include this counterfactual? Of Course not. All of their analysis was selected to get the result they had already believed to be true.
2. A UK Customs Union with the EU would increase UK trade. Oh no, it wouldn’t.
Ed Davey wants a new bespoke customs union with the EU covering most goods but not agriculture, designed to reduce trade friction while giving the UK some consultative role in EU trade policy. The Liberal Democrats have tabled a Ten Minute Rule Bill in Parliament to require the UK Government to begin negotiations with the EU for a new Customs Union.
Ed Davy believes this Customs Union is necessary because, as he forcefully claimed on BBC Breakfast the day after the Budget, ‘UK trade with the EU had dropped dramatically’. It hasn’t, except for the goods that the UK no longer makes. Ed doesn’t seem to understand that countries can’t keep exporting goods they no longer make.
The Graphs in this section come from the ONS UK trade: goods and services publication tables - Office for National Statistics. This is a monthly publication. I am using full monthly data from 1997 to avoid accusations of cherry-picking. I am using the ONS Chained Volume measures (tab 6) to account for inflation, and I am excluding precious metals from the goods category.
[Most Remainers like to cherry-pick their data by comparing post-Brexit trade with the EU from the Thesa May stockpiling-induced high point of 2018 and 2019, as companies prepared in case the UK really did leave the EU without a trade deal on 30th March 2019, as May threatened.]
Graph 4.
It is hard to see Davey’s ‘dramatic fall’ in UK exports in Graph 4. Goods exports have dribbled lower since 2022, but you shall see in the following graph that the cause is low oil and gas production due to extortionate taxes, higher industrial energy prices, and higher wages. Similarly, the EU’s EV mandate has led to lower UK car exports to the EU.
Davey’s Customs Union will not change this. The UK’s taxes, wages, and energy prices are set by UK government policy, which the UK government can change now without needing the EU’s permission. The EU’s EV mandate is its prerogative, and UK car makers need to find more markets for their ICE cars or start making EV batteries in bulk.
Davey should understand that trade varies by industry sector. Graph 5 below shows UK goods exports, broken down by industry sector and adjusted for inflation using CVM. While Graph 6 shows UK goods exports to the EU by Industry Sector, it is also in CVM. You will notice the shape is similar, although the EU buys very few precious metals and unspecified goods from the UK. The Key difference is scale: the UK exports less than half the amount of goods to the EU as it exports to the rest of the world. Other than that, total UK goods exports to all countries and UK goods exports to just EU countries have moved in line with each other, showing that any changes are due to UK industry changes or outside events such as the troughs and spikes caused by COVID and Russia’s invasion of Ukraine.
Graph 5
Graph 6.
The Exports that seem to get the most media coverage: Food and live animals, beverages, and tobacco, are the two small lines at the bottom of both graphs. They seem to be holding up well. But the big boys: Machinery and transport equipment, Chemicals, fuels, Material Manufactures, and miscellaneous manufactures are considerably lower now than they were in 2017. So, below I will examine each of them to see if there is any evidence to support creating a Customs Union with the EU:
Graph 7: SITC 6: Material manufactures exports to the EU
SITC 6: Material manufactures. Graph 7 above. Exports to the EU have definitely fallen since 2018, but Davey’s Customs Union won’t fix this, as production of many of these products moved to Asia more than 20 years ago from both the UK and the EU.
However, this industry sector also includes Iron and steel. The closure of SSI Redcar in 2015, the reduction in production at Tata’s plants in Scunthorpe and Scotland since 2015, the mothballing and then closure of Liberty Steel, and Tata’s closure of its blast furnaces at Port Talbot in 2024 are the causes of the UK’s lower exports to the EU in this sector.
None of this was due to Brexit; instead, high UK energy costs, global competition from cheaper imports, financial instability, and the transition costs of moving from coal-based blast furnaces to electric arc furnaces have led to production closures in the UK.
Ed Davey’s Customs Union will not change these issues. But better UK government policy could, but this is only possible if the UK remains outside the EU and makes its own regulations.
Graph 8: UK SITC 5 Chemical exports to the EU
This industry group, Chemicals, includes organic and inorganic chemicals, fertilisers, plastics, medicinal and pharmaceutical products, dyes, paints and pigments, and cleaning products. The UK used to be a major manufacturer and exporter of all of these products; however, since 2016, several UK chemical plants have closed or moved their production out of the UK. Ten large chemical complexes have closed in the UK in the past 5 years, and consequently, chemical production has fallen by 40% since 2021. Dow Chemical (Wales) closed in 2023, INEOS’s plant at Grangemouth closed this year, and ExxonMobil’s Fife plant will close next year. The reasons cited for these closures are: high energy costs, rising carbon taxes and global competition, which has made UK production uncompetitive.
Ed Davey’s Customs Unions won’t change this, while the Government’s plan to join the EU’s ETS scheme will make it worse, as the EU’s carbon tax is about 40% higher than the UK’s carbon tax. (ie the tax that is causing manufacturers to close down in the UK.)
Graph 9: UK SITC 3 Fuel exports to the EU
Although UK fuel exports are erratic, with exports moving in line with oil and gas prices, UK exports have been decidedly lower since the introduction of the Energy Profits Levy following the 2022 spike in exports, a reaction to Russia’s invasion of Ukraine. The decline in UK fuel exports is more evident across all destinations. But as the EU has very little oil and gas of its own, it has to keep buying from any country that can supply it, such as the UK.
UK oil and gas production has fallen by 40% since the Energy Profits Levy was introduced, and investment has shifted to lower-tax jurisdictions and to jurisdictions with less onerous restrictions on opening new fields.
Davey’s Customs Union won’t change this, nor will it make it easier for the UK companies to produce more oil and gas.
Graph 10: UK exports of SITC 7 Machinery and Transport equipment to the EU
UK exports of machinery and transport equipment to the EU have held up relatively well despite the rules of origin in the UK-EU Trade and Cooperation Agreement, which require cars to contain 55% to 60% UK or EU content to qualify for tariff-free trade. Many UK cars rely on components imported from outside the UK or the EU. UK car production is dependent on semiconductors and batteries imported from China. Shortages of these goods during COVID caused dramatic drops in exports, which have since been overcome. The UK’s lack of a large-scale domestic EV battery manufacturer has made complying with the EU’s EV mandate more difficult. The UK’s high energy costs have made car production twice as expensive as in Germany or France. While the UK’s own aggressive EV mandates, without a large domestic battery manufacturer, have left UK producers struggling to meet even UK requirements.
Exports of UK-made aircraft engines and parts have been more resilient due to their high value, innovation-intensive nature, and less exposure to Net Zero regulations. The UK’s leading manufacturer, Rolls-Royce, is one of only three global players producing large civil jet engines. The UK is also a large supplier of aircraft engines for the defence industry—another secure customer. The UK aerospace sector currently has a backlog of 16,000 orders equal to 13 years of production.
Ed Davey’s Customs Union won’t change this.
Graph 10: UK Exports to the EU of SITC 8 Miscellaneous Manufactures.
Miscellaneous Manufactures includes: furniture, travel goods, clothing, footwear, precision instruments, scientific equipment, photographic equipment, optical goods, watches, clocks, toys, sporting goods, musical instruments, jewellery and even office supplies. The UK still makes most of these goods, but only at the very high-end, luxury, bespoke goods. The production of these consumer goods for UK high street brands is now mainly carried out in Asia. The movement of manufacturing out of the UK started in the 1990s. The drop in exports to the EU since Brexit is due to how the EU and the UK now count traded goods. To qualify for tariff- and quota-free exports, goods in this industry sector must be produced in the UK or the EU. This excludes many UK consumer goods, although the UK still makes scientific instruments and precision equipment. Before Brexit, a significant proportion of the goods in this sector were misrecorded as UK exports when they were actually re-exports of goods made for UK companies in factories in China, Bangladesh, or Vietnam.
The UK’s high industrial energy, high wages, and high employment taxes will ensure that this type of labour-intensive manufacturing does not return to the UK, even with greater mechanisation, as mechanisation requires cheap, plentiful energy.
Ed Davey’s Customs Union won’t change this. Ed Davey’s Customs Union has given him a platform to get in front of UK TV cameras, but that is all it will ever achieve. The Liberal Democrats are becoming increasingly irrelevant. Their idealisation of the EU will not help their cause. They need to actually examine the factors preventing efficient UK manufacturing before attempting to design a new trade structure. [spoiler alert: it’s Energy, not Brexit.]
3. Swimming with the devil! Oh no, we’re not!
Dr Tessa Dunlop believes that Brexit has led the UK to switch its trade from the EU to China. She thinks the UK’s ‘trade with China went through the Roof’ in 2018 and that this is ‘a direct result of Brexit’. Dr Dunlop explained: ‘If you cut off your right limb with your biggest trading partner on mainland Europe, you have to go and swim with the devil.’ Apparently, even though the UK hadn’t left the EU until Jan 2021, she believes people started to trade with China because ‘people were realising in 2018 that they had to change direction.’ I am not making this up; (it was on GBNew) but Dr Dunlop was. (You will find this exchange on the internet. Search on: ‘You’ve made that up’.)
Dr Dunlop will be shocked to discover that the UK has been buying Chinese goods since the 1990s; this has nothing to do with Brexit. But the UK’s trade with China is much smaller than that of other EU members, Germany and the Netherlands. (see Graph 11 below)
Graph 11: Chinese exports to the Uk and to other major EU countries
China also imports goods from the UK and EU, and again, EU member Germany is by far the largest European nation selling goods to China. (see graph 12, below). Since Brexit, even France and Italy, also EU members, sell more to China than the UK does.
Dr Dunlop should ask herself this: If the UK is only trading with China because of Brexit, what is Germany’s excuse? Or the Netherlands, France and Italy’s for that matter.
Graph 12: Chinese imports from the UK and to other major EU countries
Dr Dunlop should be delighted to know that since 2021, both UK imports from China and UK exports to China have fallen. (see graph 13, below) So we appear to be ‘swimming less with the devil’ now than in 2021.
Graph 13. UK Goods trade with China
What caused the increase in trade with China
The increase in UK imports from China from 2018 onwards was caused by Apple, Huawei and Samsung consolidating their Smartphone production in China, while in 2020/21, PC and laptop manufacturers Dell, HP and Lenovo also consolidated their manufacturing in China. This had NOTHING to do with BREXIT!
UK consumer demand for smartphones and computers drove increased imports, and as the EU does not make products that can compete with smartphones or computers manufactured in China, Brexit did not divert trade away from EU manufacturers. Brexit, as I pointed out in the exchange mentioned above, did not alter our trading terms with the EU until January 2021.
The Table below is a printout of the UK’s largest imports from China, by 4-digit HS code from 2015 to 2024, in US$1000s, from ITC. The UK’s largest import from China, Smartphones, has almost doubled since 2015 and, at $10 billion, is five times larger than even our fourth-largest import, furniture. While the UK’s second-largest import from China, computers, is now 75% higher than in 2015 and four times as large as furniture.
The most interesting import growth between the UK and China is Cars: they are now the UK’s third-highest import from China, up from almost nothing in 2015. If the UK sticks to its EV mandate, I suspect cars will soon be the UK’s most valuable import from China. And this WILL divert trade away from German and UK manufacturers, but the EU started Net Zero, so it is hard to feel sorry for them.
Conclusion
I doubt last week will be the last visitation from the Remain Zombies, but I hope that the graphs above have helped to explain that:
The NBER paper is wrong; UK GDP is still moving in line with the other large EU countries, and thanks to Brexit, the UK missed out on having to subsidise Spain and Italy, and on having to enforce about 25,000 more regulations and directives. None of which were considered by the NBER paper.
Ed Davey is wrong: UK goods trade won’t improve unless the UK drops the ‘Windfall Tax’ (EPL) on oil and gas, its environmental taxes on energy and its employment taxes, among other things. A Customs Union won’t change this.
Tessa Dunlop is wrong: The UK trades with China because it is an efficient producer of consumer goods, possibly because it doesn’t add taxes to energy production, has less onerous environmental regulations and lower wages.
But hey, they will all still blame Brexit…