Brexit and the Future of UK Capitalism

Abstract

LONG before it acquired the name of Brexit, the project of making the UK leave the European Union was a solution in search of a problem. In the battles over the Maastricht Treaty, the animating motivation of opponents was the imperative of maintaining formal national sovereignty. In the quarter century that followed, the concerns have ranged from bureaucracy and immigration to the plight of fishermen and farmers, as well as a quixotic view that trade with faraway economies is more beneficial than trade with the European continent. For each of these problems, some real and some imaginary, the EU has got the blame and leaving it has been presented as the solution, largely uncritically and thanks to a perpetual press campaign with little opposition. This EU-bashing was always based on a fantasy. But two other facts are not. The first is that the problems of the UK economic model, and its failings, contributed to the Brexit vote. The second is that while that economic model was the result of home grown political choices, the effects of these choices were shaped by the external economic conditions created by EU membership. The way in which Britain leaves the EU, too, will shape the workings of the current model and whatever changes future UK governments make it undergo. When Theresa May took office, it looked like she wanted Brexit to be about something, not just against something. In her accession speech outside 10 Downing Street, ending Britain's membership of the EU became an occasion to profoundly transform the country's economic model so that it would ‘work for everybody’. That effort quickly ran into the sand; it was left politically bankrupt after she called and failed to win the general election in June 2017. But she was right to identify a frustration with an economy that left too many behind as the core of the Brexit vote. Hence, what I have called ‘the other Brexit question’. Behind the din of Brexit politics, and the thorny trade-offs involved in negotiating Britain's future form of association with the EU, stands the question what the country should now do with itself. In the overall debate, this question has received far too little attention. But away from the limelight, thoughtful people have begun pondering it; this collection is the latest of a series of contributions.1 These contributions largely agree on their diagnosis of Britain's predicament. We can sum up the essence of its economic model with the following observations: First, on the demand side of the economy, the key characteristic is high consumption and a low savings rate, whose counterparts can be seen in low investment and a persistent current account deficit. This is linked to high indebtedness and high house prices driven by fast mortgage credit growth, in turn linked to a large financial system long treated with a light touch by regulators. Second, on the structure of supply, the share of manufacturing in total output is low by rich-country standards, and share of services correspondingly high. Even more striking is the very high share of services in UK exports. Britain distinguishes itself among larger economies by exporting about the same value of services as it does of manufactures. Then there is a starkly polarised labour market. UK economic activity is unusually labour-intensive for a rich economy, the converse of a low rate of capital investment compared to peers. This model has led to high employment numbers, but an excess of low productivity and hence low wage jobs. In other words, the problem of the jobless poor was not so much solved as transformed into a problem of the working poor. At the same time, Britain has a large number of very high paying jobs, leading to one of the highest rates of income inequality in Europe. And finally, the UK suffers from an extreme discrepancy of economic conditions between different parts of its territory. London is among Europe's richest regions, but some areas are on a par with the poorest parts of Slovakia and Portugal. The most deeply felt aspects of the British model and its failures are clearly housing prices, the polarised job market and regional inequality. In the words of Christopher Bickerton, ‘this kind of growth has driven apart the worlds of the high- and the low-skilled and introduced new fissures into British politics … the idea of a national economy has given way to something else, to a depoliticised space where economic transactions take place but where nationality as such is of little consequence.’2 And we know that support for leaving the EU was higher among those living in poorer regions, those who had not benefitted from the rise in house prices, and those stuck on the bad side of the polarised labour market, that is, those with less formal education. While some elements are more politically salient than others, all the manifestations of Britain's economic growth model listed above are tightly linked. They are not separate ills; they are rather alternate symptoms of the same disease. The rise of finance is plausibly (though partially) to blame for both the small manufacturing sector and the reliance on mortgage-fuelled consumption for demand growth. There is also evidence suggesting that an overgrown finance sector misallocates resources away from business investment. The tilt of the economy's centre of gravity from manufacturing to financial and professional services, moreover, has reinforced both the polarisation in the labour market and regional inequality. These developments are to a large extent the results of a set of deliberate policies. The growth of finance, a flexible labour market, and a smaller state imprint on the economy than most west European countries, were all components of the decision to chart a course towards a ‘mid-Atlantic’ position for the UK economy, between US-style liberalisation and private enterprise and continental regulation and state control. UK regulation was obviously finance friendly; business methods intensive in low productivity labour were helped by an immigration policy that facilitated extensive growth (by encouraging low-skilled immigration) and by a tax policy (in particular tax credits) that took the edge off some of the social consequences of the low wage economy. The relatively small size of the state, meanwhile, has strained its ability to provide public goods which could have done more to mitigate rising regional inequality. The need for fiscal consolidation after the global financial crisis, and the chosen aggressiveness with which that consolidation was pursued, worsened the strain. The upshot of this survey of the UK growth model is that to change anything, one has to change a lot. Because the model itself interlocks so many parts of the economy, and because it is a result of a complex set of policy decisions, a fundamental transformation is necessary if the status quo is no longer unacceptable. And that is just what the Brexit referendum established. Whether there is any prospect of such a transformation depends both on what form Brexit takes, and which domestic policies the UK autonomously adopts once it has left. As for the form of Brexit, two things matter in particular: the future trade relationship and how it will change (or not) the productive structure of the UK economy and, to a lesser extent, the future of EU migration to and from Britain. At the time of writing, it is still unpredictable where the negotiations on the UK's long-term relationship with the EU will end up. A withdrawal agreement and a political declaration have both been published, but they do little to pin down the eventual destination. There are, however, roughly three possibilities, all logically coherent if not equally politically likely. There could be a soft Brexit which keeps trade frictions (nearly) as minimal as they are today; this could be achieved by something like European Economic Area membership for the UK and a Customs Union with the EU. This EEA+CU model would leave external trade conditions mostly unchanged, and—provided the arrangement is credibly permanent—keep the UK economic structure looking much like it is unless there is a national decision to change it. Alternatively, there could be a hard Brexit—a conventional free trade agreement (FTA) which would reintroduce both customs checks and regulatory barriers to trade, but not tariffs. These would be exacerbated if the UK used its departure from the EU customs and regulatory union to strike independent FTAs with other economies—notably the US—which would have to recognise those partners’ product standards as admissible in the UK market. Since these would typically violate the EU's rules in many cases, the EU will insist on sufficient barriers to prevent the entrance of non-compliant goods circulating in the UK market. The EU is one of two rival regulatory superpowers (China having a chance of becoming the third) around which countries’ product and technical standards are converging. This means that even before striking out on a glorious new independent trade policy, an FTA-style hard Brexit will confront UK policy makers with an unenviably steep tradeoff between markets: any serious lowering of frictions in new trade deals would automatically and significantly raise them with the biggest market across the Channel. Finally, there is the semi-soft Brexit that has been official UK policy since the Chequers Cabinet meeting in early July 2018. As set out in the Chequers White Paper, this model aims to maintain frictionless trade in goods, but not single market trading rights in services. The scarier alternatives of ‘no deal’—a disorderly Brexit or a reversion to mere World Trade Organisation trading terms—still remain possible at the time of writing. They would, however, lead to short-term disruption rather than the long-term structural change that is my focus here. Some form of trade agreement would follow in due course. The status quo model would obviously bring the least disruption of external economic conditions—but would, by the same token, leave the UK blocked from striking free trade agreements with other countries. The FTA model would be at the opposite extreme—it would introduce the most trade frictions with the EU, but permit a trade policy that in theory could lower them vis-à-vis other markets. Both models are acceptable to the EU (subject to a solution for Northern Ireland; see below), but would be perceived to be extreme positions that would encounter strong resistance from one or other side of the UK political spectrum. Chequers, meanwhile, was an attempt at a compromise position. It is, at the time of writing, still facing strong objections from the EU, and it is attacked from all corners in Westminster. In its original form it is not viable, and the term ‘Chequers’ has been quietly dropped by the government. At the same time, the ‘backstop’ or fallback relationship the withdrawal agreement sets out to ensure no need for border infrastructure between Northern Ireland and the Irish Republic, defines a minimal friction arrangement for goods trade not all that far away from the Chequers proposal. For the reasons set out below, something like it has strong political economy reasons in its favour. I will keep using the label ‘Chequers’ for this type of model below. What would be the effect on Britain's productive structure of these varying degrees of disruption? Think of the sectors in which the UK does well at the moment. The most obvious area is of course commercial services. That includes not just finance, but a range of auxiliary and other professional services. Britain excels in cultural service exports too, from broadcasting and film making to fashion design and app development. The university sector functions to a considerable degree as an exporter of education services by hosting large numbers of foreign students and international research projects. The other area is high-productivity manufacturing, despite a relatively small manufacturing sector overall. UK industry has successfully integrated itself with European manufacturing supply chains, and as a result has significant intra-industry trade. This is most famously visible in auto manufacturing which, since the 1980s, has been based on supplying cars to the European market. Of the 1.75 million motor vehicles produced in Britain in 2017, 80 per cent were exported, mostly to other EU countries. In the same year, Britain imported 2.3 million cars from EU countries. The overwhelming share of Britain's trade in auto parts and components is also with the rest of the EU.3 These, Britain's most successful economic sectors, have some things in common. They provide good jobs, due to their high labour productivity—or in the case of some services, arguably high rent extraction. They are significantly export oriented. These two traits—high productivity and export orientation—are intrinsically linked. Exporting both requires and fosters high productivity. And they are linked to a third factor: both sets of sectors are deeply integrated with the pan-European economy and the EU's Single Market. In the case of manufacturing, its productivity relies on participating in continental-scale just-in-time supply chains. In the case of services, it relies on Single Market rights to cross-border business, which are greater than in any other trade agreement, and on the free movement of people across the intra-EU border. And this includes service industries that may not first spring to mind—not just finance but, for example, fashion design (which relies on EU intellectual property protection across the Single Market) and the film industry (which recruits and shoots across Europe). The biggest point in common is that both in high-value manufacturing and services, the best performers are successful precisely because their activities pool resources from all of Europe and sell to all of Europe. They are not good British jobs as much as good European jobs located in Britain.4 Brexit puts them at risk of moving elsewhere, and conventional trade deals (less deep than the EU Single Market) cannot bring them back. That this fact is so deeply underappreciated has seriously distorted the debate over Britain's post-Brexit economic policy choices. The strongest economic case for leaving the EU would be that the current trade structures somehow lock the UK into a suboptimal use of its particular advantages; this seems to be what some Brexit-supporting politicians have in mind in their emphasis on striking free trade deals with other countries which would somehow better realise Britain's full economic potential. But what are these advantages? It is true that the exceptionally deep integration of EU's national economies—which has meant a unique elimination of border frictions between them—promotes trade within the Single Market more than with any non-EU market. But it seems hard to argue that the resulting success in Britain's high-value manufacturing or high-margin services is a distortion—or if it is, it is a distortion that a strategic trade policy would love to be able to create. The UK's central role in EU industrial supply chains suggests that it has a comparative advantage precisely in fitting into cross-border supply chains. But high-value manufacturing supply chains are more regional than global. In Richard Baldwin's terms, most cross-border manufacturing is organised around ‘Factory Asia’, ‘Factory Europe’, and ‘Factory North America’, because of the continued importance of ‘distance costs’ combined with the rise of just-in-time production processes.5 So, frictionless trade within the EU's regulatory and customs union has not diverted manufacturing trade that Britain would otherwise have carried out with other markets; it has enabled Britain to realise its comparative advantage in servicing continental-scale industrial manufacturing. The alternative to Factory Europe will not be integrating with Factory North America, it will be disengaging from the international supply chain altogether. The same is more obviously true for some services. There is no equivalent anywhere to the EU's single market in services, so there is nowhere outside the EU for the jobs serving that market to go. (This would change if the EU allowed third countries the same rights to sell into Europe as member states, which it only does with the EEA members who accept its regulatory order.) Britain's Single Market membership, far from distorting anything, has allowed it to pursue its comparative advantage in financial services to a greater degree than it otherwise would have. The most likely consequence of Brexit, then, is to increase barriers precisely to the sectors in which Britain's comparative advantage lies and which offer Britons (and high-skilled EU immigrants) the best jobs the economy can provide. Only a status quo (EEA+CU) Brexit can avoid this altogether. Even then, however, there is a risk that the isolationist attitude of leaving the EU, exemplified in the critical attitudes to immigration that sealed the vote and any more restrictive immigration policy in future, diminishes the attractiveness of the UK to foreign workers (and students). Net immigration has already fallen steeply since mid-2016. In contrast, the FTA option would pull the rug out from under the ‘European jobs in Britain’. In goods, this will happen through the introduction of border checks. Even without the introduction of any tariffs, customs checks will still be required for purposes of rules of origin. Any absence of regulatory harmonisation will necessitate checks that goods crossing borders comply with the product standards of the importing market. The regulatory divergence is likely to become harder to manage if the UK enters independent trade deals, as mentioned earlier. For services, the FTA option will undo the treaty basis for ‘passporting’ which permits the direct sale of services across EEA borders as well as a variety of trade promoting measures such as strong intellectual property recognition. A stricter migration regime would of course add to the new obstacles to services trade with the EU. Finally, a Chequers-type model aims for the status quo ante in goods trade, and hence in most of manufacturing, but accepts a rupture in services. It is well understood by economists, though too rarely in the public debate, that the most direct effects of the international trade environment are on the economy's productive structure rather than on the macroeconomic composition of aggregate demand. It is, therefore, on the supply side, not on the demand side, that we should examine how these various Brexit options will alter the British economic model, if at all. If export services and high-margin manufacturing are twin peaks of British productive success, there is a striking difference in how they interact with the broader economic model and, therefore, their role in the country's political economy. In terms of the bifurcated labour market, both provide the high productivity and well remunerated jobs that one would like to see more of. But while high-margin manufacturing acts as a counterbalance to polarisation, export services in many ways aggravate it. Good factory jobs are geographically more dispersed, and more available outside the biggest cities, than are jobs in finance or other knowledge-intensive services. In terms of social access too, high-skilled factory jobs are likely to be more open to those without the cultural background, personal connections or academic pedigree that still shape recruitment to professional services. As Institute for Fiscal Studies economists have documented, male workers with low formal educational achievement are particularly dependent on jobs in the goods producing sectors which are dependent on the EU supply chains.6 In contrast, knowledge-based service sectors tend to concentrate in big cities—from which many people of modest backgrounds are being priced out—and employ workers with the highest levels of academic achievement. It is fair to attribute one of the chief failures of the British economic experience since the 1980s, namely the educational and territorial polarisation of socio-economic outcomes, to its accomplishment in expanding high-productivity (or high-rent) knowledge services. So, the external forces on the British economic model that will come with Brexit are twofold. One is foregone national income overall, the reasons for which other chapters in this collection demonstrate at length. This will strain public finances and private incomes in any scenario, but the harder the separation from the EU's trading regime, the more severe the income loss. The other is the relative effect of separation on Britain's two chief exporting successes. The challenges of the British economic model are likely to respond in diametrically opposite fashion to respective changes in the fortunes of each of the two success stories. In short, the tensions that brought us Brexit are inversely related to the prospects for high-skilled manufacturing, whereas they might be soothed by a decline in finance and similar industries, even as this would reduce the country's export earnings, overall economic output, and average incomes. In ascending order of hardness—from a status quo Brexit through Chequers to an FTA Brexit—the services export businesses are hit sooner than goods. At the same time, some of those service sectors are more resilient to new trade barriers than manufacturing. Take financial services, as the most talked-about sector at risk of losing market access in anything but the softest of Brexits. The share of revenues in the City of London that faces disruption from the loss of ‘passporting’ rights to sell directly to clients in the rest of the European Economic Area is typically quoted at around 20 per cent. Some of that could be salvaged when passporting ends through judicious sharing of activity between London and EU-27 units of the same firms. In any case, the remaining 80 per cent may well be able to go on much as before—and regulatory autonomy could conceivably be used to make it easier to sell some services to the rest of the world. More generally, it is not well known that UK services exports are already more heavily tilted towards non-EU markets than goods exports. This suggests that these exports are unaffected by EU membership and thus likely to weather Brexit reasonably well even in its harder forms. For manufacturing, in contrast, the Brexit hit will be more binary. If trade frictions make UK production unattractive for just-in-time supply chains, there are no comparable supply chains to slot into as an alternative. Even were the UK to join the North American Free Trade Agreement (NAFTA) or the Trans-Pacific Partnership (TPP), there is no realistic role the UK can play in North American car manufacturing, say, that compares to its current role in European value chains. Putting these observations together then, the likely effects on the British economic model do not nicely align with the degree of Brexit ‘hardness’. While status quo Brexit will mildly challenge the productive structure across the board, going one step harder to a Chequers-style deal will protect manufacturing, but hurt services. Going harder still, to the more distant FTA-type relationship with the EU, will hit manufacturing brutally and make little further difference to services. And the independent trade policy that is the rationale for such a relationship will tilt the economy further towards services, since new trade deals will very probably seek market access for UK service exports in return for greater import competition by manufactures. A reflection on the prospects for investment points in the same direction as the differential incentives for production in different sectors. Low capital investment is part and parcel of the intensive use of low-productivity labour by swathes of British businesses. Now Brexit itself discourages investment overall, both because of the uncertainty it creates, and because of the certainty that whatever the outcome, the effect on growth will range from ‘bad to very bad’, in the words of Christine Lagarde, the IMF head. But here, too, the particular form of Brexit matters. Some will argue that a hard Brexit, which would allow an independent trade policy, could boost investment once new trade agreements are struck with other countries. Other things equal, a significantly liberalising trade agreement with, say, the US, would be a prompt to invest in the activities that might see increased export demand (offset by disinvestment in those facing greater import competition—farming and food products, for example). Since a new trade agenda will presumably prioritise access for services exports, services investment may be thought to face better prospects under a hard Brexit-cum-’global Britain’ trade policy. But as mentioned above, for a country currently situated in the EU regulatory orbit to enter a deep trading relationship with US-centred economies runs the risk of either running duplicate regulatory regimes or even cutting off market access for EU-focussed exporters. New trade deals after Brexit may therefore act not as the usual incremental boost to GDP, export earnings and the attractiveness of investing in business capital. Instead, if they require regulatory reform, they may amount to ‘guillotine’ moments that trigger much greater disruption elsewhere in the economy than the incremental cross-border trade opportunities can offset. The mere agenda of a ‘global Britain’ could itself create quite significant uncertainty, as it introduces bigger downside risks to existing economic activity than trade liberalisation typically does. This could affect the goods producing sectors particularly hard. These reflections raise a prospect that has received next to no attention in either the expert analysis or the public debate over Brexit. A hard Brexit (on FTA, let alone WTO trade terms) will not only ensure the most loss of growth in aggregate, but stands to exacerbate the polarising characteristics of the UK's existing economic model and harshen the social tensions to which it has given rise. In contrast, a Chequers-style outcome, while it will hurt the British economy in the aggregate, is the external environment most apt to disadvantage export services relative to the rest of the economy. A politician who sees as her chief responsibility to put a disjointed society back together again after the Brexit referendum may well give priority to factory supply chains over the City of London. Here, then, is a persuasive political economy reason for Prime Minister Theresa May's Chequers model, which does precisely that, seeking frictionless trade in goods—essential for just-in-time manufacturing, not to mention the absence of border checks on the island of Ireland—while regaining regulatory autonomy in services at the accepted price of worsened access to EU services markets. Perversely, this just could serve as a catalyst for a rebalancing of the economic structure to remedy the divisions that pain Britain's political economy. To be clear, a Chequers-style Brexit will not by itself do anything positive for the high-value goods sector or the parts of the economy that depend on it. Those regions and population groups at the sharp end of Britain's economic polarisation have more to lose from a loss in national income that threatens both government services and public infrastructure spending. And even just to do no harm to manufacturing-reliant segments of the economy, the British government must move its policy quite a bit closer to EU preferences than the Chequers White Paper set out. (It must, in particular, sign up to an indefinite customs union and expand the scope and the automatic updating of the Single Market rules it is prepared to accept. The government has moved in this direction.) Until frictionless trade in goods is secured for sure, these sectors will be hit by withheld investment and relocation of production to continental Europe. A concerted policy programme based on the idea of favouring the UK's high-value goods producing sectors—starting with managing Brexit so as to protect those sectors above all—may be the country's best chance at a growth strategy that prioritises the neglected parts of the economy, even at the price of slower growth in the aggregate. Manufacturing jobs in general have become scarcer in all rich countries, and high-productivity (and hence high-paid) manufacturing jobs are, by their nature, always going to be limited in number. The labour-intensive manufacturing of the mid-twentieth century will never return (nor would it be able to sustain the living standards we rightly expect in advanced economies today). That does not mean it is impossible to boost modern manufacturing in a country with the right conditions and policy makers set on the task. A recent study from the US offers an instructive example.7 In the aggregate, its manufacturing sector has had one of the rougher experiences in the rich world in recent decades; and manufacturing-intensive areas have on average performed markedly worse than the economy at large. Yet a number of industry-heavy communities—the Grand Rapids region of Michigan is one example—have not just avoided that fate, but outperformed even the non-manufacturing-dependent part of the economy. The outperformance shows up in jobs growth that may be in manufacturing or in new (service) sectors. These successes can be attributed to policy measures—including local infrastructure, customised job training through local educational institutions, and extension services for small to medium manufacturing firms—and to education levels in the community, also amenable to influence by policies on education and to boost the attraction and retention of highly educated residents. Such interventions interact to make private investment and hiring more profitable; the skills-related policies also contribute to local earnings growth, with further positive spill-overs in turn. What could UK policy to do emulate such success stories and encourage investment and productivity growth in high-value manufacturing or alternative activities for the areas that currently rely on it? There is little evidence that private business investment is particularly sensitive to either corporate tax rates or the interest rates influenced by monetary policy. Among tax policies, the tax rules for capital income may be more relevant, but here, the political economy is hardly favourable. If one root cause of Brexit is the unequal distribution of the fruits of economic growth over the last generation, a policy of favouring capital income over labour income in the tax code is likely just to make things worse. By and large, it is not rentiers and capital owners who feel left behind by economic change. A much more promising policy effort would be to tilt the relative profitability of labour-intensive and capital-intensive production models, by making the former more expensive and the latter more lucrative. This can be done by lifting wage floors and requiring better working conditions, while at the same time upgrading workers’ skill levels so as to make labour more complementary to capital enhancements. Sadly, the immediate effect of the Brexit vote has been a reduction in businesses’ spending on skills training—see Swati Dhingra's chapter in this collection. To reverse trends headed in the wrong direction, a combined policy is required. The government must urgently secure market access for the most valuable sectors with certainty (so as to encourage private skill formation)—this means a close economic relationship with the EU; investing directly in skill enhancement, productivity and infrastructure in the targeted sectors under a long-term productivity strategy; and most importantly, doing so in a place-based fashion, conscious of the regional impact both of the existing UK growth model and of leaving the EU. This may well mean demoting commercial services in the hierarchy of policy priorities. Few of the frustrations that prompted the British public to vote Leave were caused by the EU. And yet both the political economy of Brexit, and its likely economic effects, point towards a profound reform of the growth model that did in fact cause them. While Brexit will result in a UK economy that is less prosperous overall, there is a possibility it will also start to redress some of the imbalances I set out at the beginning. That probably requires the long-term economic relationship with the EU will be at least as close as the goal of frictionless trade in goods aimed at in the Chequers plan. A more distant relationship will intensify the contradictions built into the current economic model. That could theoretically be a reason to think it will also create greater pressure to resolve them. More likely, it is a reason to doubt any government can choose such a deep rupture. The pressure to change the model is in any case so strong now—in part thanks to the divisions laid bare by the Leave vote itself—it seems change will have to come. That change will not, of course, make itself. It will require a broad set of joined-up policies, of the kinds outlined above: greater public investment, tighter labour market regulation, and increased spending on skills and training and public goods in lagging regions. All of this is much more compatible with a Chequers-type goods-focussed model than the alternative hard Brexit destination (though both are worse overall than the EEA-CU option). We could list more policies, but what they have in common is a view of the state that is much more comfortable with market-shaping interventions than has been the case in the UK policy making class for a generation. They are also nigh-on impossible without accepting a larger state imprint on the economy—simply put, higher levels of taxation and spending. On both dimensions, then, an economic model closer to what is found elsewhere in Europe. At the same time, Brexit will force a starker choice between hewing close to and deviating from the EU's regulatory zone (in favour, presumably, of the US one). Even if the UK retains the extensive package of regulation required to avoid new frictions in trade with Europe, it will nevertheless have lost its influence on how that regulatory regime evolves. The likely result is that the differences between Europe and the US, which the UK has at times worked to reduce, will accentuate. The global independent trade policy pursued by some Brexiter politicians may, by their own admission, only be achievable through a deep rupture with Europe's regulatory regime—at least if an ambitious free trade agreement with the US is to be struck. But again, that very fact makes it far less likely to happen because the public support will be lacking. The paradox of Britain's EU membership is that has enabled the UK to fulfil its plausible destiny as a hybrid between a European and a US socio-economic model. The paradox of Brexit may well turn out to be that it forces Britain to become more European.