The Times They Are A-Changin’: Brexit RIP While Inequality Flourishes

“Look at me standing, here on my own again”

Here in the UK, PM Starmer has had an interesting Iran crisis.

For the first time in many years, a British PM stood-up to a President and said NO.

There has been much analysis of what this might mean for the special relationship. In the short-term it is badly damaged, but once Trumpism is history and America finds its moral compass, there is no reason it cannot be reconstituted, as a better relationship, more equal, with the UK being less a vassal state relying on big brother for protection.

The positive for this current estrangement, is the realisation that our best interests are served by those across the English channel not the Atlantic

The PM acknowledges that the war and belligerent attitude of the Trump administration highlights our need to refocus on “ambitious” new ties with Europe, both economically and in defense. Starmer’s grasp of the situation was highlighted when he said how Britain emerged from the crisis “would define us for a generation”.

‘our best interests are served by those across the English channel not the Atlantic’

He also acknowledged that “Brexit did deep damage to our economy, and the opportunities to strengthen our security and cut the cost of living are simply too big to ignore.

“The steps we’ve taken so far have been in relation to the single market and I’m ambitious that we could do more in relation to the single market, because I think that’s hugely in our economic interests.”

In June, it will be 10-yrs since” vote leave” triumphed in the EU referendum. Brexit and the EU is, as I wrote at the time, “the never ending story”. Undisputedly it has been a failure, so much so, that Nigel Farage, the instigator and architect of the disaster, rarely mentions it.

A YouGov poll on our EU membership found showing that:

• Overall, 63% would vote to rejoin with 37% opting out
• Among 18-25 year olds 86% would vote to rejoin with 14% opting out
• Among retired voters 60% would rejoin with 40% opting out

The crisis in Iran, and Trump’s previous comments about wanting Greenland taught European leaders that not only is the US unlikely to save them in a crisis, they are increasingly the crisis. As a result, Europe has a newly discovered togetherness especially in defense, with the lines between EU and non-EU membership becoming blurred as countries seek mutual protection.

The possible recession caused by the Iran war has only served to encourage and speed-up this togetherness.

In the UK this appears politically opportune. The government is finally realising that it can never be tough enough on immigration to please Reform voters, and in trying to do so they are simply boosting support for progressive parties, such as the Greens.

Whilst winning back voters in the short-term will be made more difficult by the latest leg of the cost of living crisis, in the long term reversing Brexit, which is thought to have reduced GDP by up to 8%, and taken C.18% off investment, is the way forward. Source: https://www.kcl.ac.uk/news/new-research-finds-uk-investment-up-to-18-per-cent-lower-as-a-result-of-brexit

Of course there will be push-back from what is left of “vote leave”, which will primarily be from Nigel Farage and his Reform party, but “Brexin” is coming closer. There is a delicious irony in Brexit being undone by Farage’s “bessie mate” Trump!

‘There is a delicious irony in Brexit being undone by Farage’s “bessie mate” Trump!’

Reform has already sought to make political capital out of the intensified cost-of-living crisis, likely offering solutions similar to Trump’s election pledge: “Starting on day one, we will end inflation and make America affordable again. We’ll do that. We’ve got to bring it down.”

Perhaps a 40% increase in inflation is the new affordable?

Taking a more rational approach, chancellor Reeves has been meeting supermarket bosses to discuss the potential impact on the cost of living due to Trump’s war. This approach seems to confirm that the government understands that interest rate policy alone won’t tame supply-side inflation.

Simon Roberts, the boss of Sainsbury’s, appears to think that prices are unlikely to rise until the summer as long-term contracts on energy and stores of fertiliser will keep a lid on costs for now. However, UK farmers and producers are warning that, without help from the government and support from retailers, there will be price rises and potential shortages.

Readers will know that in “Is Capitalism Serving the Masses?”, I questioned the activities of UK energy providers who took the opportunity of supply-side inflation to indulge is a spot of “profit-price” inflation.

Research suggests that, despite the supply-side inflation for food during Covid and the war in Ukraine, the supermarkets were more restrained in their pricing.

Cumulatively, food prices rose by over 37% between January 2020 and mid-2025, driven by energy costs, supply chain issues, and the war in Ukraine, with food inflation peaked at 19.1% in March 2023.

‘Perhaps a 40% increase in inflation is the new affordable?’

While this has eased, food prices remain high, with staples like olive oil, eggs, and dairy seeing the steepest increases.

The following data is based on the “RPI: Percentage change over 12 months – Food and catering”,

12-mth RPI to July 2020 = 1.7%

12-mth RPI to Mar 2023 = 17.5% Source: https://www.ons.gov.uk/economy/inflationandpriceindices

Whilst prices peaked in 2023, supermarkets tightened their margins, absorbing higher operating costs which resulted in operating profits for the sector falling by 41.5% in 2022/23. Average net margins fell to between 1.6%–2.2%. https://foodfoundation.org.uk/sites/default/files/2023-09/TFF_PROFIT%20BRIEFING_Final.pdf

It is likely that the Iran war will further exacerbate the cost-of-living crisis, and is the latest in a serious of “unknown unknowns”. Whilst many point to the cost-of-living crisis originating with Russia’s invasion of Ukraine, I would suggest we can trace it roots back to 2008 and the GFC, which, for the majority, was when the rot set-in. It many have been a slower burn for middle-income workers, but the GFC followed by Covid and two unexpected wars has seen those cost-of-living catchment move up the scale.

There are also “known unknowns.”

Stock markets seem to have become oblivious to events, touching record highs and celebrating a dubious ceasefire like it was Armistice Day 1919. Stock prices continue to decouple from bond markets; bond yields have risen to reflect rising inflation fears, whilst stock prices suggest good times are back.

We now live in an uncertain world, caused by extremist leaders doing the unexpected.

‘We now live in an uncertain world, caused by extremist leaders doing the unexpected’

This will continue as long as moderate politicians fail to understand inequality. Inequality is the hidden rump of the iceberg, with poverty being the visible tip.

Research by the Foundational Economy Group showed that, between 2019 and 2023, the lowest-earning 20% of UK households had to spend an extra 96% for the bare necessities of food, housing, transport and energy. The highest-earning 20% actually spent 45% less.

It isn’t rocket science to understand that inflation impacts most on those with the least.

Whilst populism isn’t the answer to inequality it presents itself as such. Everything is easy, broad brushstrokes such as Trump’s promise to deal with the cost-of-living on day one. His solutions of tariffs and conflict have only made it worse.

The questions is. can his MAGA supporters grasp the fact that they are merely electoral cannon fodder? If they can then there is hope for progressive politics.

The last word goes to the newly elected MP for Gorton and Denton, Hannah Spencer:

“people who work hard but can’t put food on the table. Can’t get their kids school uniforms. Can’t put their heating on. I don’t think it’s extreme or radical to think working hard should get you a nice life. And I don’t think, if you’re not able to work, that you [shouldn’t] still have a nice life.”

“And I need a friend, oh, I need a friend

To make me happy

Not stand here on my own”

Today’s piece is based on Starmer having a “good” Iran crisis, and standing-up to Trump. Sure, UK-US relations have deteriorated, but whose relations with the US haven’t?

Brexin is now looking a reality; it may not be a full “let’s rejoin”, but there are clear signs that both parties realise they need each other.

In the short-term this won’t ease the cost-of-living crisis, but there are signs that food retailers and the government can work together. The energy sector might be different, but the real solution is diversification away from fossil fuels. If not, we are only ever one lunatic away from the next energy crisis.

Lyrically, it’s one from back in the day: “Wonderful Life” by Black.

Enjoy!

Philip

@coldwarsteve

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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