Britain's economic prognosis is grim – it may be time to consider reversing Brexit

The economic storm is gathering. As the Consumer Prices Index rose to 3 per cent, a level last reached in April 2012, the Organisation for Economic Cooperation and Development warned that the economic consequences of a hard Brexit could be disastrous. Philip Hammond, already under pressure from all sides, must fancy a holiday – and he would be well-advised to take one soon lest the pound weakens further.

While many believe inflation may have reached a peak following the fall in sterling’s value since last year’s referendum, the prospect of an interest-rate rise is real and will probably hit hardest those who are already struggling to make ends meet. When you rely on credit being cheap, it does not take much to topple over the cliff edge.

The OECD’s warning about the dangers of Brexit will doubtless be dismissed by Brexiteer ideologues as merely an attempt by one supranational organisation to look after the interests of another. Its suggestion that a reversal of the Brexit process would boost the UK economy will similarly be disregarded as short-termism. Those who remain rooted to EU withdrawal at any cost increasingly accept that it will be accompanied by a degree of economic adversity – but it will nonetheless be worth it in the end, however distant.

Plainly a no-deal Brexit causes the greatest concern for the OECD. It argues that the probable impact would be renewed stagnation of the pound against other major currencies; cuts to the UK’s credit rating; and the flight of investment, as major businesses look elsewhere for growth. Overall, the OECD concludes that a hard Brexit would reduce the UK’s economic growth by £40bn by 2019. It is a grim scenario, which lays bare the rank idiocy which advanced the case for Britain’s EU departure on the promise of more money for the British economy – £350m a week to be precise. That falsity becomes more outrageous with every passing day.

As to the prospects for a cheerier outcome, there is plainly little optimism at the OECD’s Paris headquarters. The evidence from the negotiations between Britain and the EU certainly makes it hard to be sanguine; and it is perhaps fitting that the OECD report follows so soon after the Prime Minister’s meeting this week with the European Commission President, Jean-Claude Juncker. The only positive thing about the pair’s latest encounter is that it was not as bad as the previous one, although that is hardly saying much. References to the meeting being “friendly” and “constructive” – and to Brexit talks “accelerating” – seem like so much hot air.

What makes matters worse, as the OECD report shows, is that there are already such significant, pre-existing, structural deficiencies in the UK economy. Indeed, it is those underlying problems – brushed off seemingly without a care by many Brexiteers – which make the UK so ill-prepared to make an early success of Brexit. Perhaps the most obvious pitfall, identified many times over, is Britain’s lack of productivity compared to other advanced economies. That will not be improved without investment in both skills training and advanced technology, neither of which is on the horizon and neither of which will be made more likely after a cliff-edge fall.

Likewise, the present stagnation in wages, allied to rising inflation, is already proving to be a major obstacle for thousands of people in this country. On Monday, the chief executive of the Financial Conduct Authority, Andrew Bailey, sounded an alarm over the extent to which young people in particular are perennially turning to unsecured credit simply to be able to afford everyday items including food. Overall, Britons are already on the hook for £200bn of debt, excluding mortgages.

Supporters of Brexit frequently proclaim that, once the UK’s withdrawal from the EU is done, national unity will kick in and secure a successful future for the country. That, allied to Chris Grayling’s belief in our ability to grow more cabbages, will apparently see us through. Implicit and explicit comparisons with the “Britain alone” mentality of the Second World War abound: through hardship will come a brighter tomorrow. Even the OECD’s chief, Angel Gurria, summoned the spirit of the Blitz in describing how Britain might tackle the challenges ahead.

The difference of course is that this is a crisis we have brought on ourselves and from which we could still turn. To rule out the possibility is ideological bunkum.