This blog was written on Sunday Oct 14th, 2018

When we began writing these BEERG Brexit Briefings in June 2017 we continually advised businesses to “hope for the best but prepare for the worst”.

As we head into a crucial Brexit week, with EU leaders meeting in Brussels on Wednesday evening and Thursday with Brexit very much on the agenda, we are dropping the “hope for the best” part and are now advising businesses to “prepare for the worst” because that is where we are heading.

The way we see it, there is no deal that Prime Minister May can negotiate with Brussels that would command a majority in the House of Commons.

As Andrew Rawnsley, one of the most perceptive UK political commentators puts it in the Observer on Sunday:

On the face of it, this makes it very hard to see how Mrs May can strike any agreement with the EU for which there will be parliamentary approval. The opposition has no incentive to help her out of a swamp of the Tory party’s own making. The Democratic Unionists say they will cut off their life-support. The DUP are co-ordinating with the Tory Brextremists. The parliamentary maths is a horror.

We called it that way weeks ago in our BEERG Brexit Blog and nothing has happened since then to change our view. We are reaching the point where the impossible demands of Brexit, to have all the benefits of single market and customs union membership without any of the obligations, run headlong into immovable realities that the EU will not slice and dice its internal order to suit the UK. You just cannot square a circle.

Yes, I know that the immediate impasse is over the “backstop to the backstop”. But that in itself is linked into the longer-term issue of the future relationship between the UK and the EU, even if the backstop forms part of the legally binding Withdrawal Agreement and the future relationship part of the non-binding Political Declaration.

How did it come to this? Leaving aside the Thirty-Year Tory war over EU membership, that has slowly poisoned the UK body politic and that resulted in Cameron’s ill-fated referendum in June 2016. Take it from June 24^th, 2016 when the UK woke to find it had voted to leave the EU.

The first thing to understand is that there never was going to be a happy outcome. Again, as Rawnsley put it in his Observer article:

Another way of looking at the last 28 months is as a long and expensive education for Britain that any deal is going to be sub-optimal, because there is no deal with the EU that is better than the terms we currently enjoy as members.

Former UK cabinet minister Dominic Grieve had previously said: “There is no form of Brexit that isn’t hugely damaging to the future of this country”. If only the UK government had been listening.

We have consistently described the Brexit process as a negative sum negotiation in which both sides end up worse off. In such a negotiation the stronger side will always dictate terms because it is not voluntarily going to take the costs, especially when the costs arise from a decision of the weaker party to trigger the process. The UK was always going to come out of the Brexit process worse than it went in. They broke it. They own it. They pay for it.

However, it is always possible to play a bad hand well and to limit the damage. Unfortunately, the UK has played a bad hand badly, very badly.

Most people have an image of negotiations as two sides sitting across a table, each trying to outfox each other. In my experience, the extent to which this is true constitutes about 5% of any negotiation. In reality, negotiations are a complex process which begins with a critical question: “How do we set up the room?”

“Setting up the room” is shorthand for structuring the process to increase your leverage. It begins with defining clear negotiating objectives, understanding your options, knowing what alternatives are available, assembling your team and, of utmost importance, working out where the other party will be coming from and why.

It also involves identifying all the stakeholders on your side and mapping what are their interests in the process and how that affects you and limits or enhances your capacity to do a deal.

Finally, if you have the ability to influence the timeline of the negotiations then make sure it works for you and not against you.

Once you have done all this you need to frame your opening position to maximise its acceptability to the other party. As the old adage puts it: you never get a second chance to make a first impression.

Unfortunately, Theresa May’s “first impression”, created through her Tory Party 2016 conference and 2017 Lancaster House speeches, was all about her red lines: out of the single market, out of the customs union, out of the jurisdiction of the European Court, no more “massive payments” into EU funds and an end to the free movement of people from the EU into the UK. A negative message from the word go.

In her Lancaster House speech Prime Minister May declared:

This agreement should allow for the freest possible trade in goods and services between Britain and the EU’s member states. It should give British companies the maximum freedom to trade with and operate within European markets – and let European businesses do the same in Britain.

Decoded, the UK wanted its “red lines” but also wanted all the benefits of free and frictionless trade with the EU because, May contended, it would be in the EU’s own interest to allow for such trade. The imperial mindset dies slowly: we know your interests better than you know them yourself.

This “first impression” has determined the course of events since. The EU’s reaction was simple. The UK wanted to have its cake and eat it. It wanted to cherry-pick the single market. The EU was never going to agree to this. You cannot be better off out than in.

In her speech May also used the phrase: “We are leaving the European Union, but we are not leaving Europe.”

Of course, the UK wasn’t leaving Europe. It is geographically part of it though possibly there are lone Brexiteers, somewhere, working on developing technology that will move the UK further into the Atlantic, close to the US, or even bypass the US and drop it into the Pacific. Anywhere but Europe.

But economically there is no other Europe than the EU. The EU customs union and single market is the way the nations of Europe have chosen to organise themselves economically. As we noted in last week’s BEERG Brexit Blog Margaret Thatcher had been instrumental in doing this, turning the EU into the UK’s home market rather than an export market.

Leaving the EU implies shrinking the UK’s home market, not something any rational politician with the best interests of their country at heart would want to do. But commitment to a cause – and Brexit is a cause or it is nothing – takes you to strange places.

If May’s Lancaster House speech alienated the EU, it also had the effect of creating unreal expectations on the part of her political stakeholders in the Conservative party. For she effectively told them that she could deliver a deal with the EU that would give the UK all the benefits of EU membership from the outside while still leaving it free to “control its money, laws and borders” and be able negotiate its own trade deals with other countries.

May has been trying to walk back these impossible commitments ever since. But the hard Brexiteers have taken the commitments as written on sacred tablets of stone which must be honoured to the letter.

Under pressure from her own backbenchers, extra-parliamentary Brexiteers and the anti-European tabloid press, May triggered the two-year Article 50 exit process on March 29, 2017, just two months after her Lancaster House speech. She did this believing that the EU would agree to parallel negotiations, one strand dealing with the Withdrawal Agreement, the other the future economic relationship between the UK and the EU. This was another misreading. Triggering Article 50 locked the UK into an inflexible timetable.

Again, the EU made its position clear and has never wavered. First a Withdrawal Agreement with the priorities being a settlement of the UK’s outstanding financial obligations, the rights of EU citizens in the UK and UK citizens in the EU and, for many Brexiteers an issue coming out of left-field, an insistence that there could be no return of any border infrastructure on the island of Ireland between Ireland and Northern Ireland.

Second, at best there could be discussion on the future “framework” of the UK/EU relationship, but detailed discussions would have to wait until after the UK left the EU. No parallel talks.

David Davis, the then UK Brexit Secretary, promised the “row of the summer” over the EU’s refusal of twin-track negotiations. He came, he saw, he folded. Within an hour. So, the pattern was set. The UK turned up talking tough, demanding the full baguette, and went away with crumbs. Not even a croissant.

It is also worth noting that Davis, despite his deep dislike for the European Union, in reality knew little about how it actually worked. He had written before being appointed Brexit Secretary that the UK should be negotiating a trade deal with Berlin rather than Brussels, not realising that EU members negotiate as a bloc rather than individually. It is not a great move to appoint, as your lead negotiator, a man who knows nothing about the people with whom he is negotiating.

But before Davis even got to have his (non) row, May called an election believing she would increase her parliamentary majority. Instead she lost the slim majority she had and came to depend for her continuation in office on the votes of the Ulster Democratic Unionist Party (DUP). Given the critical role the Irish border issue has to come to play in the Brexit process this undercut her room for manoeuvre given the political beliefs of her DUP stakeholders.

When you set the room up that badly that’s what happens: you create unreal expectations on your own side; destroy goodwill on the part of the other side; miscalculate the timing. What could possibly go wrong?

As I was writing this on Sunday evening an alert from the Financial Times flashed up my computer screen to tell me that an outline deal has been agreed. The key paragraph read:

So Britain looks to be leaving the customs union, but staying tied to it for a temporary period that may be hard to define. It is achieving legal independence, but still voluntarily applying rulings of EU judges. Most sensitively, it is agreeing to special treatment for Northern Ireland that could, as a last resort, create more legal barriers to trade within the UK.

My immediate reaction was maybe, maybe not. What’s agreed over a weekend can be dead by Monday evening. By the time I had gotten to the bottom of this page word was coming through that the talks had broken down. The deal didn’t even get to Monday morning. No great surprise. In summary: the impossible is impossible to deliver.

As we said at the top of this BEERG Briefing there is no deal that Theresa May can negotiate that could command a majority in the House of Commons.

The hard Brexiteers in the Tory party hate what is on offer from Brussels, no matter how opaque the language. The DUP see it as a dagger to the heart of the union. 10 DUP votes against, along with say 30 hard Tory Brexiteers will strip May of her majority. That 30 may be a significant underestimation.

Would there be enough Labour dissenters willing to break ranks with Corbyn to push it through? Again, I doubt it. How many Labour MPs will want to lend their support to a Tory government that many of them see as having imposed undue hardship on their constituents through a policy of fiscal austerity over the past eight years? Especially if there was to be a general election that could put Labour in power in prospect.

By this time next week much of the fog may have cleared. What is on offer from the EU to the UK will on the table for all to read. And offer is the word, for Brexit is, and never was, a negotiation. The UK is leaving the EU but still wants to access the EU market. It has to because, despite the rhetoric, the UK cannot leave the EU market. It is too deeply integrated into it. There are too many jobs in the UK dependent on access.

If, as a non-EU member you want to access the EU market then the EU will allow it. At a price. In general, the price is non-negotiable. The UK is slowly learning that reality.

There is a great scene in the Jack Ryan movie Clear and Present Danger where Harrison Ford needs a helicopter. He asks the seller how much to buy the helicopter. $1m is the reply. OK, says Ryan. Can I take it for a trial run? Yes, says the seller, but I’ll need a deposit. How much, asks Ryan. $1m says the seller.

The price is the price. No negotiation.

One final comment. As others have pointed out, Brexit is not a one-day event. It is not something that will happen on March 29^th, 2019, if it happens. It is a process of unwinding 40 years plus of deep UK social and economic integration with the EU.

If it took 40 years to get here it will take more than 2 or 3 to do the unwinding. Given the passions that have been unleashed it will dominate UK politics for years to come. What a waste of energy when there is so much else to be done.

After March 29, 2019 there will be no return to the status quo ante. Because the status quo ante is gone. It is in the grave. Cameron put it there.

When it comes to Brexit, the UK has deadlocked itself.