How Britain squandered the best hand in the world

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Did any country have a cushier place in the world than Britain a decade ago? In 2014, the UK was in the EU but not in the more problematic euro or Schengen borderless zone. It had, if not a special, then a close relationship with an open and trading US. Most tantalisingly, Britain was well placed to become the link between the north Atlantic world and China. The west’s first renminbi bond was issued in London 10 autumns ago.

If we picture these three blocs as overlapping circles, together accounting for most of world output, the UK was the overlap itself. Unlike the US, which has defence obligations at both ends of the Eurasian landmass, Britain didn’t even have to spend much for its global profile.

From three friends in high places to essentially zero is quite the feat of statecraft. Britain is now outside its own regional club and exposed to a protectionist America and having to defrost its relationship with China after a period of mindless neglect. This week, Sir Keir Starmer became the first UK prime minister for almost seven years to meet Xi Jinping in person, a fact that I had to check again to believe.

Britain isn’t entirely to blame for its loneliness. America’s inward turn was unpreventable from outside. Once it happened, there was going to be pressure from Washington on London to distance from China, too, whose own behaviour didn’t help. Also, the openness of Britain in 2014 needed checking. Its dark side included an attitude to Russian capital that was somehow the height of cynicism and naivete at the same time.

But Brexit was a choice. (A hard Brexit was certainly a choice.) So was the sheer extent of the cooling towards China under the last few Conservative premiers, who took the American line without the American GDP that might have made it tenable. When a UK-US trade deal failed to materialise — as was foreseeable to trade wonks, Washington watchers and single-cell organisms in other galaxies — Britain should have shuffled closer to one or both of Europe and China. Out of some blend of amour propre and internal Tory politics, it didn’t.

There is much wrong with the new-ish Labour government. It struggles to understand how economic growth ever happens except through some asinine “partnership” between state and business. (A research trip to America, or just Florida, might be educational.) Its energy policy has impending fiasco written all over it. But the following can be said in mitigation. Labour’s geopolitical inheritance, and in a trade-dependent nation therefore its economic inheritance, was a historic disgrace that could take a decade to mend.

What will that fix look like? Which of the triangle points that Britain used to face all at once — Brussels, Washington, Beijing — can it salvage?

China will be difficult, as Xi’s manner towards Starmer suggested this week. Trump is the most important person of the century so far precisely because his dissent from the trade consensus, so shocking at the time, has spread. The EU has its own economic tiff with Xi, and unlike most of Europe, the UK is involved in security projects, such as the nuclear submarine pact with Australia and America, that implicitly have China in mind. Starmer can court Xi — not putting tariffs on Chinese electric vehicles will help — but it won’t and perhaps shouldn’t recover the “golden” moment of a decade ago.

The US, then? Boris Johnson couldn’t charm a trade deal out of Trump. Four prime ministers got nowhere with the Democrats, under whom America became more not less of a fortress. Even if a Labour government led by the temperamental opposite of the US president-elect can secure, say, exemption from tariffs, what nation builds a future on this kind of personal caprice? In the end, Britain does much less trade with the US than with the EU, which accounts for 42 per cent of UK exports after Brexit.

The issue goes yet deeper. If it wasn’t plain before, recent years have brought home that Britain is an inescapably European country, in its per capita income, in its sovereign borrowing power (compare the markets’ reaction to Liz Truss’s “mini” Budget in 2022 with their insouciance about Trump), in its lack of natural resources and, above all, in its expectations of the state. A Trump aide has said that Britain should emulate America rather than “socialist” Europe. Those of us who take a similar view have to reckon with the fact that Labour won a landslide when the tax burden was already at a longtime high. The idea of an “Anglo-Saxon” outlook, of a Britain that chimes more with the US than with Europe, misreads all three places.

In the end, all the structural forces point towards some UK-EU rapprochement, perhaps in the 2030s, perhaps in the form of the customs union. The opportunity cost, which is the power to strike trade deals elsewhere, isn’t what it was. History is seeing to that. Looking back, the most important fact about the referendum was its timing. It was a gigantic bet on extra-European trade in the last year, in fact almost the last quarter, before the world took a protectionist turn with Trump’s first election. From there, the China relationship was going to be awkward, too. Over decades, Britain played its way into as good a hand as any nation in the world. The most consoling thing it can tell itself now is that two cards were stolen for the one wilfully squandered.

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