During the build up to joining the Common Market the economy grew all through 1972. When Heath took the UK into the Common Market in January 1973 and until the oil price shock in October 1973 the British economy continued to grow. This growth was the result of joining the Common Market as it provided an outlet for UK goods. Between 1971 and 1972 the Purchase tax was reduced from 45% to 25%.
Empire preference had served the UK well and allowed UK goods to dominate the Empire. So much so that the US drew up War Plan Red in the late 1920s and early 1930s, to provoke a war with the UK, by invading Canada, so as to defeat it and gain a larger foothold in the Empire. After the Second World War Empire preference had served Britain well and enabled the UK to export goods and build up its industry.
As Europe was on its' knees the UK economy grew sufficiently for McMillan to declare 'you've never had it so good' in 1957. Throughout the late 1950s and 1960s as the US's Marshall Plan kicked in, Europe's economy grew fast. The UK didn't want to join Europe as it was doing fine with Empire preference and US investment but as Europe grew the demand for goods grew but the UK was out of the club. Those in the Empire didn't have sufficient purchasing power to buy enough UK goods at the pace to keep the economy growing at the same rate as Europe. It was against this background that Heath took the UK into the Common Market so as to gain access to the European market. It was to replace one preference - the Empire, with another the Common Market. Which had at its heart the free movement of capital, services, goods and people.
The UK were prepared to ditch the Commonwealth so as to get into Europe with all the pitfalls. When the vote in 1975 came along Tony Benn and Enoch Powell were in the forefront of warning that the UK had lost democratic control over the sovereignty of parliament and giving it to Europe. Benn in particular was concerned about the loss of democracy. Political sovereignty was subdued for economic advantage. He was also worried about the right of an elected UK government to set out an economic policy that it was elected to do, which may be blocked by those in Europe. For instance state intervention for British industry, a similar argument today with the EU threatening to block the UK from supporting the fibre optic industry laying fast broadband. A result of the UK leaving the EU.
As long as the UK is inside the EU they turn a blind eye to this type of state intervention to industry and to grants to attract industry to the UK e.g. Japanese car makers, Siemens to Hull etc., but when the UK leaves the gloves will be off even more than they are now. Trade war moves are well and truly under way in the world with Trump's American first policy and this can only get more intense. I suspect BAE systems and Rolls Royce will be on Trumps radar.
Trade war tensions will effect UK/EU trade in goods and in particular financial services. Frankfurt are at the forefront
Frankfurt steps up efforts to lure €1tn-a-day euro clearing from UK ... and this will damage the City of London, the backbone of the UK economy. Unlike in the 1970s when it was manufacturing, mostly British owned, that was the most prominent part of the economy. It is dog eat dog, no holds barred as can been seen from US action against Canadian owned Bombardier – a fellow Nafta member. And Trump’s noises about German cars and machinery exported to the US.
Moving to WTO tariffs will damage the car industry amongst others. The UK government may well get more tariff money from the EU than it has to pay out but this cannot be used to give the UK car industry a financial subsidy through corporation tax reduction or other means. As not only would this would be against WTO rules, it would have to apply to all industry, thereby leaving a large black hole in the Chancellors finances.
These negotiations should have been over by Christmas after the vote to leave. But the longer they do go on, the more uncertainty it is causing for UK PLC. Not good for investment and jobs.
