Theresa May was right to call the election before the public feels the real consequences of Brexit

Thus far, for understandable reasons, Brexit and the economy have usually been treated as separate election issues. What the latest depressingly depressed figures on economic growth show is that the two are, in fact, intimately related, though the leads and lags, and different impacts on various sectors of the economy can serve to obscure the linkage. Nonetheless, Brexit is the economic issue.

For manufacturing, Brexit has been a perversely beneficial thing over the past year. This is almost entirely because of the impact of the referendum vote on the value of the pound against foreign currencies. Though it has gyrated somewhat since the outcome became known 24 June, it has pushed the cost of imports up and the price of exports down, thus boosting export production and the substitution of foreign goods and services with British-supplied alternatives. It has also helped British companies that are export-oriented protect their profits and, thus, investment. Even so, even this sector has slowed in recent months.

Much the most serious “hit” to growth has come from the service sector, and in particular in retail. The reasons are not difficult to find. That same depreciation of sterling that has helped the British sell more Jaguars and Scotch whisky aboard has also pushed up the price of imported food, raw materials, manufactured goods and services. In such an open economy as Britain that has led to a further squeeze on the buying power of wages, with pay increases still at subdued levels. At the same time the need to protect the public finances for the future impact of Brexit – Philip Hammond’s avowed aim for the Treasury is to achieve “resilience” – means higher taxes and lower benefit rates than would otherwise be the case. All of this adds to stagnant or declining living standards, at a time when there has been scarcely any upward progress in the near-decade since the financial crisis began. No wonder, then, that consumer confidence is likely to become weaker as the uncertainties crowd in.

Even more vitally, the coming investment weakness will further aggravate the UK economy’s historical failure to improve productivity and, in the long run, create a high-tech, high-productivity, high-wage economy. Business does not want to invest in Britain unless they can be sure of a return on those funds after the UK loses its easy access to the single market. Some companies or sectors, such as Nissan, may have been given some sort of tacit guarantees by the British state, but not every company will enjoy that underwriting. New plant and machinery and modernised working practices are the only way to achieve those things in the long run. If Brexit is going to send that into a downward spiral, as seems likely, then Brexit will damage the British economy permanently.

Whether Theresa May, Mr Hammond and colleagues were prescient enough to see these trends developing, there can be no doubt that the situation is much more likely to deteriorate than markedly improve in the next few years, and with it her Government’s popularity and electoral chances.

Today, we are in an economic “phoney war”, if not a fool’s paradise, where the “sky didn’t fall in” as so-called Project Fear predicted, and the false conclusion is drawn that Brexit will continue to be a sunny and pain-free affair. It won’t be, and ministers know that full well. The fall in the pound has made exporting to the single market easier and more lucrative; but that will not be the case when Britain is outside it – damaging half of Britain’s external trade.

Restrictions on free movement of labour post-Brexit, which the Government has prioritised above all else, will also hit economic growth. Whether it is hotel workers in London, or seasonal workers in the market farms of Lincolnshire, or skilled surgeons in NHS teaching hospitals, or highly qualified engineers in the aerospace industry – Britain needs migrants from within and outside the European Union. If the Government is foolish enough to try to stick with its migration cap of the “tens of thousands” after Brexit, then the consequences of that will simply damage the economy further. The tourists may come with a cheap pound; but their hotel rooms won’t be ready without the staff to clean them. That is why the Open Britain “Drop the Target” campaign deserves support.

Brexit, then, is an economic issue as well as one about sovereignty and identity. It is one that is only starting to make its baleful effects fully felt. For now slogans about “taking back control”, about “strong and stable leadership” and about “coalitions of chaos” still have some value to the Conservative Party, but they will sound emptier and emptier when business and housing investment is cut back, spending slows, unemployment numbers start to rise, the housing market starts to stumble or even crash, homeowners suffer negative equity, and wage increases are outstripped by price rises. Can we be sure our banks would be strong enough to withstand such strains as homeowners and business default on mortgages and loans?

A dismal prospect? Yes, but perfectly plausible. Whatever bills Brussels produce for outstanding EU pensions and programmes will be trivial when set against the cost of a sustained economic slump and a subsequent financial crisis. Ms May, on her own narrow terms, was wise to cut and run before the bad news really starts to roll in. That is another reason why she will need a larger majority. Yet, as Mrs Thatcher discovered when she was toppled in 1990, even a Commons majority of 100 or so is no defence against comprehensive economic failure. It is not far away.