This blogpost was written early on Saturday July 27th 2019

Taking what has been said by Boris Johnson, the new UK Prime Minister, and other members of his government at face value during their first few days in office – and I see no good reason why we should not – it seems clear that there will be no “Brexit agreement” in place by October 31^st, the date the UK is due to leave the EU.

Given what has been said, it seems to me that it would be prudent for businesses to work on the basis that the UK will leave on October 31 without an agreement and they should now plan accordingly.

Johnson’s government is almost exclusively made up of deeply committed Brexiteers, while many of his backroom staff come from the 2016 Vote Leave campaign. With this government, what you see is what you get and what they say is what they mean.

If there is a double or treble bluff, then the bluff is that there is no bluff.

They are operating in plain sight. That they greatly overestimate their negotiating leverage is another matter which we will come back to later in this Briefing. For the moment, what they say is what they think, and they believe they can bend reality to their will.

Johnson has replaced May’s “red lines” with a “red brick wall”, and, as far as he is concerned, the Withdrawal Agreement, Political Declaration and the proposed transition period have all crashed into that red wall and come to a complete stop.

Putting together what was said both during the Tory leadership election process and in recent days, the Johnson government position appears to be as follows:

• The Withdrawal Agreement (WA) has been rejected by the House of Commons (HOC) three times and is dead. On Friday Johnson told Emmanuel Macron, the French president, and Angela Merkel, the German chancellor, that the WA must be reopened to end the deadlock. A No 10 spokesman said: “He reiterated the message he delivered in the House of Commons: Parliament has rejected the Withdrawal Agreement three times and so the UK must fully prepare for the alternative – which is to leave without a deal on Oct 31. “He said the only solution that would allow us to make progress on a deal is to abolish the backstop.”
• Johnson has made it a precondition of any future talks that the backstop be taken off the table completely. Exit mechanisms such as time limits or a right on the part of the UK to end the backstop would not be acceptable. It must be scrapped completely. The Irish border issue should be settled during future trade talks.

• The €39bn, which the EU sees as owed to settle outstanding financial obligations” is to be used with “creative ambiguity” to secure a favourable future trade deal. Johnson will pay that for “frictionless borders” between the UK and the EU, including the Irish border. This is also known as single market membership without the obligations.
• Johnson regards the proposed transition period as “vassalage”, during which the UK would be obliged to follow all EU laws but would have no say in EU governance during that time. He wants it replaced with a “standstill” during which all trade and commercial relations would continue as of today, but with the UK outside the scope of EU law. During this standstill, talks on future relationships would get under way.

In a nutshell, Johnson wants the UK to be able to leave the EU and “escape” its legal framework on October 31^st next, while ensuring that there is no disruption to trade relationships in either goods or services. Past financial obligations are to be used to buy future deals. Previously, this was known as having your cake and eating it.

None of this will be acceptable to the EU which will see it as the UK trying to dictate the terms under which it will leave. Michel Barnier, the EU’s chief negotiator, called Mr Johnson’s demands “unacceptable” and accused him of using “combative language”. Mr Coveney, Ireland’s foreign minister, said: “He seems to have made a deliberate decision to set Britain on a collision course with the European Union and with Ireland.”

The EU has readily accepted that the UK is leaving. It has never tried to persuade it to reverse its decision. From the start, within days of the referendum in 2016, the EU set out its position clearly. First, negotiate a Withdrawal Agreement covering citizens’ rights, financial obligations and the Irish border issue.

Then, when the UK has left, negotiations can open on future relationships. The EU will not negotiate a future relationship with a country while it is still a member. It fears, and rightly so, that a departing country would try to use its position in EU decision-making bodies to leverage its negotiating position by behaving obstructively.

Because of the unique position of Ireland/Northern Ireland the EU proposed a “backstop” which, should other arrangements not be agreed, would see Northern Ireland staying aligned with such EU rules as facilitated all-Ireland trade and prevented the need for new border infrastructure. The UK government then asked that this arrangement be extended to the whole of the UK and the EU reluctantly agreed.

The UK government also realised that even if it left the EU on March 29^th, 2019 with an agreement, government and businesses would not be able to switch from membership to non-membership overnight. It asked for a transition arrangement, which it insisted on calling an “implementation period”. Again, the EU agreed, subject to the UK abiding by all EU laws, including new laws during the transition, but having no say in EU decision making.

But, Theresa May failed to get the deal agreed with the EU through the HOC, which brings us to where we are today.

Johnson now appears to have made any further negotiations impossible by demanding that the “backstop be binned” as a pre-condition of such negotiations. Ireland, and the rest of the EU regards the backstop as a vital EU interest, not just an Irish interest. What Johnson is demanding is that the EU put the interests of a non-member, the UK, ahead of what it sees as its own interests. As some commentators have put it, the UK wants Ireland “thrown under a bus” so a “pure Brexit” can be delivered.

In playing tough, as we noted last week, the UK will want to keep in mind that when it comes to future trade talks between the UK and the EU all EU countries have a veto in those talks. If the Irish electorate forms a very negative view of UK behaviour in the Brexit process then it will force its politicians to exercise that veto.

Brexit in the UK is all about politics, not economics. It would be well for the UK government to keep in mind that other countries have politics too.

It is worth keeping in mind that never before in history has Ireland sat on the stronger side of the table in a negotiation with the UK. From remarks attributed to UK politicians that “Ireland should know its place”, this obviously rankles with them.

As of today, the legal position is that the UK will leave the EU on October 31^st next, unless one of two things happens.

The first one is that the HOC votes to revoke the Article 50 notice and to cancel the UK’s departure from the EU. The European Court said that the UK can do this unilaterally and that there is no need for the EU to agree to the cancellation. However, as the HOC is split between Remainers, Soft Brexiteers (leave with a deal) and Hard Brexiteers (leave at any cost) a majority for revoking A50 does not seem likely.

But never say never. Especially as Brexiteers continue to taunt the anti-no-deal majority in the HOC – e.g. Mogg-dares-remainer-rebels-revoke-Art50

The second one is that the UK government asks for an extension to its EU membership, beyond October 31st. In light of what Johnson has said, he is unlikely to do this. Such a refusal could trigger a vote of confidence and see the Johnson government be thrown out of office. Given the arithmetic of the HOC this should not be ruled out.

In fact, a number of commentators think that this is what Johnson wants so he can run a general election along the lines of “Support my government which supports the will of the people to leave the EU.”

A high-risk strategy, with an unpredictable outcome. If he lost, it would see Johnson go down in history as one of the shortest-lived UK Prime Ministers ever.

We noted earlier that we believe that the Johnson government overestimates its leverage in its dealings with the EU.

In all negotiations the bigger party usually wins. No doubt, there are examples to the contrary, but in any prolonged negotiation over time, the bigger and better-resourced party generally prevails. This is especially so when the bigger party is defending existing arrangements that it sees little need to change. Such as the European Union defending its single market and customs union from the demands of a country that has indicated it is leaving.

That’s just the way things are. Sure, the smaller guy may dance around a little, throw a feint or two, pull a smart move, momentarily disorient their opponent. But only fleetingly. In the end, the rule of size wins out.

Resilience, energy, can-do spirit, talking loud and confidently, count for nothing. Brute strength is all that matters. Certainly, a flamboyant personality can dazzle a room but it is a mistake to see negotiations as coming down to personalities. In the end, the fundamentals, the balance of forces, always reassert themselves.

A seasoned negotiator will prepare for any negotiation by first asking the question: “Who has the leverage?” Once you know the answer to that question you can, more or less, predict the outcome of the negotiation, identify the “landing zone” where the parties will end up. When you are six times bigger than the other party, as the EU is compared to the UK, you usually have the leverage. Especially, when most of the leverage on the other side consists of threats to shoot itself. The only preparation you can do if you are going to shoot yourself is to have the hospital bed ready and blood transfusion on standby.

In any negotiation you have to spend time, a lot of time, holding your own side together. The textbooks refer to this a “intra-organisational bargaining”, the process through which you establish your objectives and agree what it is you want to get out of the negotiation. This is not a once-off exercise. You continually need to keep your stakeholders in the picture throughout the negotiations, updating them as matters develop. As those who have been through it know, it is a long and exhausting process. Especially when you have a big and noisy awkward squad.

Again, this is easier to do when you are the party in possession, when your overriding objective is to defend what you have. Maintaining the unity of the EU27 has been relatively easy. Cohesion around the demands that the rights of citizens should be protected, that the UK should pay what it owed and that the Good Friday Agreement in Ireland should be safeguarded was straightforward to construct.

Compare and contrast this with the way matters have been handled in the UK. There has never been any attempt to develop a consensus around what leaving the EU was to mean in practice. The narrowness of the referendum result should have given pause for thought. Instead, the mandate to leave the EU has been interpreted as a mandate for radical economic and political transformation. Naturally, this has resulted in ferocious resistance, which runs from ardent Remainers through to “soft Brexiteers”, identified as those who believe that the UK should only leave the EU on agreed terms.

Add to this mix the fact that both Scotland and Northern Ireland voted to stay in the EU and the EU know that they are dealing with a UK which, while it may talk loudly is riven internally.

The EU will not rip up its Brexit strategy at the behest of Boris Johnson. To do so would send a signal to all of the other EU’s negotiating partners that it is there for the taking. It is not going to send that signal.

For now, the EU will sit and wait and see how events play out in the UK. No need for it to do anything. After all, on November 1 next, the EU27 will still be there, working away, all processes and procedures in place.