Sunak is taking steps to improve UK-EU relations

So now we know. Brexit is proving even worse for the UK economy than the official forecast of a 4 per cent hit to GDP over 15 years. It’s already reached 5.5 per cent, according to a study by the Centre for European Reform (CER) think tank. Significantly, a disappearing Covid effect no longer masks the damage of leaving the EU. John Springford, the CER’s deputy director, said it was now clear that the difference between Britain’s sluggish performance compared to similar economies was down to Brexit rather than the pandemic.

The CER calculates that Brexit is costing the government £40bn a year in lost revenue, which on ministers’ own figures would allow them to give all public sector workers an inflation-linked pay rise instead of a real-terms cut and still have £12bn to spare. The think tank also cites a very clear Brexit effect on business investment, which hits productivity and therefore the politicians’ holy grail of growth.

The study is not a one-off. The trade figures used to get much more media coverage than they muster today, but they are another ticking timebomb. Experts believe the UK is heading for a record trade deficit in 2022. Overall, imports outgunned exports by £75bn over the past 12 months, more than double the previous record. Of course, Brexit is a factor.

On the face of it, both Tory and Labour politicians are doing nothing to wake the country from its sleepwalk. In fact, that impression is misleading. Rishi Sunak is quietly taking important steps to improve the UK-EU relationship but won’t shout it from the rooftops to avoid alienating Brexiteer Tory MPs. Officials in both London and Brussels tell me they are increasingly confident the dispute over the Northern Ireland protocol will be settled in February. Crucially, I’m told Sunak has given his officials room to negotiate a compromise under which the EU would reduce checks on goods going from Great Britain to the province in return for the UK accepting a role for the European Court of Justice in overseeing the protocol. A deal on agri-foods, previously seen as off-limits by the UK government, might also be on the table.

Hardline Eurosceptics and the Democratic Unionist Party will cry foul, with the DUP threatening not to return to the mothballed devolved government in Belfast. Sunak’s secret weapons are the Northern Ireland secretary Chris Heaton-Harris and his deputy Steve Baker; they were previously leading lights in the European Research Group and so would be well-placed to sell the deal to the Brexiteers, leaving the DUP isolated. If the protocol cloud has been lifted, Sunak and Jeremy Hunt hope to reduce trade friction with the EU – another private recognition of the damage caused by Brexit.

Although Sunak is moving in the right direction, he might run out of time to complete the journey before the next election. That may fall to an incoming Labour government. Again, Keir Starmer is not going to shout about it now, but Labour would forge closer links with the EU across the piece, without rejoining its institutions in a first five-year term. Shadow cabinet members are enthusiastic – in private – about using the levers of power to cooperate with the EU on the many occasions this would be in the national interest.

So both the Tory and Labour leaders say one thing about Brexit in public and do another in private. Behind closed doors, they now recognise the damage is irrefutable but cannot spell it out in public – Sunak because he was a Leaver and cannot admit Brexit was a mistake, Starmer because he thought it was a mistake all along but doesn’t want to remind Leave supporters whose votes he needs.

In my ideal world, the two main parties would work together, and at least collaborate on how Boris Johnson’s threadbare trade deal could be beefed up to help business.