Britain shrinks to mid-size nation
Britain shrinks to mid-size nation
In the summer of 1925, London hosted the British Empire Exhibition at the newly built Wembley Stadium, with space for 125,000 people. It later became the national football stadium.
At a cost of 12 million pounds, it was the largest exhibition ever staged in the world and attracted 27 million visitors. Of the 58 territories in the Empire, 56 took part. Britain had the largest Empire on earth.
A century later, British Prime Minister Sir Keir Starmer is celebrating three important trade deals he has signed this year – with India, the United States and the European Union.
“Britain is back on the world stage,” said Starmer this week after signing the EU deal. “It will deliver cheaper food and energy for Britain and gives us unprecedented access to the EU market.”
In 2024, in GDP terms, Britain’s economy ranked sixth in the world, at US$2.67 trillion, after the U.S., China, Japan, Germany and India, according to the World Bank. Britain ranked second in Europe, narrowly ahead of France, with Russia in eighth place.
Starmer was celebrating the fact that the deal with the U.S. was first signed with a foreign country by the government of Donald Trump since he declared a tariff war on all his trading partners.
It was also the first deal signed by Britain with Brussels since its people voted to leave the EU in 2016.
Starmer is playing with a weak hand. A century ago, Britain was the centre of the world. Now it is a midsize economy excluded from the world’s three biggest trading blocs – the U.S., the EU and China.
Its departure from the world’s biggest market was self-inflicted. In 2024, the EU had 449 million people and a GDP of 17.935 trillion euros. The decision to leave was Britain’s biggest economic policy mistake since 1945.
Brexit is estimated to cost the UK about 100 billion pounds a year, equivalent to about four per cent of its GDP, compared to the amount if it had remained in the EU.
Public opinion polls this year conducted by YouGov and BMG Research have found a majority of British wishing to rejoin the EU totally or in part, with a maximum of 40 per cent wanting to stay out.
But Britain’s deeply divided politics, especially over immigration, mean that Starmer cannot rejoin. His election manifesto last year promised “red lines” that he would not cross – joining the EU single market and customs union.
To win the consent of Brussels, he had to agree to European trawlers fishing in British territorial waters for 12 years in return for reduced trade barriers for British food entering the single market.
Britain’s fishing industry and the Conservative and Reform UK parties accused him of “selling out” Britain’s fishermen.
In total, the deal with Brussels will add only 0.2 per centage points to Britain’s GDP – compared to the four per cent lost from Brexit.
The deal with Washington is positive but still leaves Britain worse off that before Trump came to power in January. It remains burdened with a basic 10 per cent tariff on its exports. And it had to give greater access to American beef, ethanol and agricultural products.
One argument of the Brexit lobby was that, free from Brussels, Britain would be able to negotiate better and easier trade deals around the world. In the EU, Brussels is responsible for foreign trade for its members.
“It was plausible to say that the UK, with an open, mid-size economy, could do as well, or better, in a rules-based international order by being agile and flexible rather than being a member of the EU,” said Jonathan Portes, a professor of economics at King’s College, London.
“But that world is gone, at least for the moment. We are now in a much more difficult environment, and the UK has to find its way,” he said.
1925 was simpler. The BBC opened in July that year as the world’s first long-wave broadcast radio transmitter. In October, John Logie Baird transmitted the first television pictures, Who was leading the world?
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