The biggest loser from Brexit is not Britain, but the European Union. By many measures, it is a failed institution. It has failed to provide economic growth and job opportunities for many of its citizens. Without the UK, it will be even weaker. It needs to modify to survive.
Economic Growth
Take economic growth, for instance, as measured by the World Bank. From 2010 to 2014, the latest data available, the average EU country, excluding the UK, grew at a rate of 1.0 percent per year. The UK grew at nearly double that rate—2.0 percent per year. In cumulative terms, the EU, excluding the UK, has grown 5.6 percent since 2010, while the UK has grown 10.2 percent. For comparison, the United States grew 2.2 percent annually and 11.6 percent cumulatively over this period.
The UK is not the fastest-growing economy in the EU. Many of the newer, eastern European members grew faster. For instance, Estonia has outpaced the rest of the EU with 3.9 percent annual growth since 2010. However, among the western European countries which made up the original EU, the UK’s 2 percent growth rate stands out. Among these original EU countries, only Luxembourg (3.1 percent annual growth) grew faster, while Germany (2 percent) and Ireland (1.9 percent) were roughly on par with the UK.
Seventeen out of twenty-six measured EU countries grew slower than the UK over this period. (Malta and Croatia were excluded from the analysis, the former due to insufficient data and the latter due to only having joined in 2013.) Five EU countries—Greece, Italy, Portugal, Spain, and Cyprus—have seen negative average annual growth.
Western European countries are defined here as the original signing countries of the Maastricht Treaty in 1993: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, and the United Kingdom.
Unemployment
Then, consider unemployment. Jobs are a way that people can better themselves and, ideally, find some upward mobility. The UK has among the lowest unemployment rates in the EU, at 5.0 percent in the last quarter of 2015, the most recent period for which bloc-wide data are available, according to Eurostat. The only EU countries with lower unemployment rates were Germany (4.4 percent) and the Czech Republic (4.5 percent). For comparison, the United States had an unemployment rate of 5.0 percent during this period.
The average EU country, excluding the UK, had an unemployment rate of 9.4 percent. The worst countries were Greece (24.4 percent), Spain (20.9 percent), and Croatia (15.6 percent).
The UK fared slightly worse when it comes to youth unemployment (defined here as unemployment among people under 25). The UK’s youth unemployment rate was 13.7 percent in the last quarter of 2015. Six countries in the EU had a lower youth unemployment rate—Germany, Denmark, the Czech Republic, Malta, the Netherlands, and Austria. The average EU country had a youth unemployment rate of 22.0 percent. For comparison, the US youth unemployment rate was 11.2 percent.
Innovation
The rate of innovation in an economy can be a path to higher productivity and growth. Fortune Magazine currently lists 174 “unicorns,” or private companies valued at over $1 billion. These unicorns are a good proxy for an economy’s level of innovation. The United States leads the world by this metric, with 101 unicorns. The United Kingdom has eight unicorns, compared with ten for the rest of the EU. Half of these ten are headquartered in Germany. Therefore, the UK represents 44 percent of all EU unicorns.
Nobel Prize Winners
The UK’s record in innovation is reflected in its disproportionate number of Nobel prizes. Since 1993, when the modern EU was founded, EU countries, including the UK, have earned 70 Nobel Prizes. Twenty-three of these, or 33 percent, have gone to the UK. For comparison, the United States earned 105 Nobel Prizes over this period.
The UK has earned two Nobel Peace Prizes, representing all prizes in the Peace category awarded during this time period. The UK has also earned ten Nobel Prizes in Medicine, representing half the EU’s total. The UK also punches above its weight in Economics (three prizes out of the EU’s eight) and Chemistry (four prizes out of the EU’s fourteen).
Conclusion
The EU should be asking itself why Britain has generated these superior results, and how it can emulate Britain’s performance. Britain is now a net purchaser of EU goods. As the dust settles and news of Brexit is absorbed, it is clear that the EU will benefit from more trade with Britain, rather than cutting its economic links.
Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.
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