This blogpost was written late on August 10th
The ideological complexion of the Johnson administration makes a no-deal Brexit more and more likely and businesses need to get ready accordingly. At the very least, they need to prepare for a prolonged period of great uncertainty in the UK and in the UK’s relationship with the European Union.
The replacement of Theresa May by Boris Johnson was not just a change of personnel at the top. Nor was it just a change in the negotiating approach to Brussels with Johnson adopting a Trump-like “madman” demeanour, as he famously suggested he would, if given half a chance, at a dinner in London in 2018:
“Imagine Trump doing Brexit,” Johnson added. “He’d go in bloody hard … There’d be all sorts of breakdowns, all sorts of chaos. Everyone would think he’d gone mad. But actually you might get somewhere. It’s a very, very good thought.”
It is much more radical than that. The Johnson government represents a complete ideological switch concerning the meaning of Brexit and what it involves for the UK if carried through.
Many on the radical Thatcherite right, frustrated that they have never been able to secure an electoral mandate to complete their “revolution”, have taken their rage out on the EU, claiming that the EU was the cause of their failure. Now, under the guise of Brexit, and having seized control of government, they plan to roll out an agenda that if presented to the electorate on its own terms would have scant chance of success.
The noise over the “anti-democratic Irish backstop” is, to use one of Johnson’s favourite phrases, just a “dead cat on the table”. As he explained in a Telegraph article in 2013:
Let us suppose you are losing an argument. The facts are overwhelmingly against you, and the more people focus on the reality the worse it is for you and your case. Your best bet in these circumstances is to perform a manoeuvre that a great campaigner describes as “throwing a dead cat on the table, mate”.
That is because there is one thing that is absolutely certain about throwing a dead cat on the dining room table – and I don’t mean that people will be outraged, alarmed, disgusted. That is true, but irrelevant. The key point, says my Australian friend, is that everyone will shout “Jeez, mate, there’s a dead cat on the table!”; in other words they will be talking about the dead cat, the thing you want them to talk about, and they will not be talking about the issue that has been causing you so much grief.
The ”Australian friend” is Lynton Crosby, one of Johnson’s current political advisors. The “dead cat” tactic is the political equivalent of the conjurer’s sleight of hand – watch my left hand so you don’t see what my right hand is doing. It is all smoke and mirrors to distract from the real agenda.
Theresa May, for all her red lines, ended up trying to achieve what we might call a “minimalist” Brexit. As much Brexit as necessary to be able to say that the UK had left the EU. As much EU as possible to minimise the economic damage and to try and hold the UK intact.
For the ultra Brexiteers this was not enough. They wanted a complete rupture with the EU. A “second break” with Rome, the Reformation 2:0, as Iain Duncan Smith recently put it.
Johnson plans to give them their “Reformation” with a “no-deal Brexit”. What with his colourful love life, he could easily pass for the Henry VIII de nos jours.
When David Frost, Johnson’s Brexit point-man, went to Brussels recently to meet Commission and Council officials he was asked, if (theoretically) the backstop was removed would the House of Commons accept the Withdrawal Agreement. As RTE’s Tony Connolly reports, the answer was no.
What Johnson wants is to “bin the backstop” because his people see it as preventing the UK cutting trade deals across the world. His concern is not Northern Ireland, still less the “all-Ireland economy” and the Good Friday Agreement, the backstop was originally designed to protect.
It is “buccaneering Britain”, the belief that once out of the EU the UK will suddenly, once again, become a global player, as in the days of the Empire. Johnson would gladly throw the Northern Ireland economy under a bus to further this ambition. And, as we suggested above, picking a fight with Ireland and the wider EU over the backstop distracts from his wider ambitions.
Johnson will offer to protect citizens rights in a post-Brexit world because it is in the UK’s interest to do so. Practically all of the three million EU citizens in the UK are there to work, or are the immediate families of those there to work. They contribute and pay taxes. They are a net plus to the UK. There are very few EU citizens who “retire” to the UK.
While a great number of UK citizens living elsewhere in the EU also work, contribute and pay taxes, they are probably outnumbered by British retirees. While Lords and City money managers may own chateaux in France and villas in Tuscany, most of the retirees are living on modest pensions in the warm south of Spain. They have already been hit hard by the drop in the value of sterling. Three years on from the 2016 referendum, the pound has fallen some 15% against the Euro. That’s a chunk of short-change if you are living on a fixed-income pension.
Throw in the potential loss of access to the Spanish health care system and thousands of UK retirees will no longer be able to afford to live there. Nor does this this take into account new registration requirements for non-EU citizens that they may need to go through if they want to stay. If the UK government were to insist that all migrants to the UK speak English, then why would European governments not equally demand that UK migrants to their countries speak the local language? How many English people living in Spain can speak Spanish?
The no-dealers do not want hundreds of thousands of angry UK “expats” suddenly returning home, with all the costs that would involve for the UK government. £2bn to upgrade some NHS hospitals won’t stretch very far. Hence the concern with citizens’ rights.
Johnson will also try to use the money the UK owes as a result of accumulated EU obligations as a quid-pro-quo for a favourable, future trade deal. Like agreeing to pay your outstanding bar bills provided you get a discount on all future drinks.
It is now clear that many in the Johnson government do not want a deal because they want to be completely free of any EU influences on policies and laws. Frost, Johnson’s EU point man and former chief executive of the London Chamber of Commerce and Industry, said in an article reproduced on the Chamber’s website:
“Business organisations have often in the past criticised the EU’s drift towards heavy labour market regulation… So I will take some persuading it will be a good outcome if the EU is able to set new UK labour market rules without any UK say – as currently seems to be envisaged by the leaders of both major political parties.”
Frost argued that that new EU rights should not automatically be written into law after Brexit. With a no-deal Brexit, existing EU laws will remain on the UK statute books until they are removed by Parliament. But there would be nothing to stop a Johnson government shredding them at will.
A no-deal Brexit gives the radical Brexiteers a clean sheet of paper on which to write. Or, so they believe.
A “no-deal” Brexit will be difficult for all. Such an event has never happened before. No major country has ever quit a trade bloc, still less a bloc to which it exports about 50% of its goods and services and from which it imports about the same. New barriers to trade are inevitable and when barriers appear, trade disappears or, at the very least, becomes more difficult and costly.
I have never believed that a “no-deal” Brexit will result in mayhem and chaos overnight. Yes, there will be difficulties and delays but to that extent is impossible to say. But look at what happened this week when BA’s computers went down and the part of the National Grid went offline. How many management and IT systems in the UK can cope with the nation-wide shock that will result from Brexit?
For its part, the EU will take such actions as are necessary to protect its member states as best it can. Some of these actions will mitigate the impact on the UK in the short-term. As Jonathan Freedland puts it in the Guardian, Brexit will be less a blowout, more a slow puncture.
But the new barriers will gradually impact business decision making. Why be outside the EU when you can be inside? Sure, the UK market on its own is big enough to merit investment. But investment designed with both the UK and EU markets in mind will slowly dwindle. What business is going to invest in the UK to service the EU market?
The Brexiteer answer to this is that the EU greatly values UK trade and will offer the UK a generous trade deal after it leaves. After a short-term hit, frictionless trade between the UK and the EU will resume, while at the same time the UK will be free of EU regulations and able to negotiate with non-EU countries. As a low-tax, low-regulation country it will be a magnet for businesses, especially when EU access resumes.
I am not convinced by this narrative for several reasons. First, if the UK has left the EU with “no-deal” then the EU will be disinclined to open trade talks until the UK meets what the EU sees as its obligations on the Irish backstop and the financial settlement. The UK may rail against such pre-conditions but who is to say what is fair or not fair in international negotiations? Power and leverage is what counts. Ask all those ex-members of the British Empire why they “voluntarily” joined the Empire in the first place. So, no trade deal anytime soon.
Secondly, to say that the prospectus of an imagined “Singapore on Thames” would be highly politically contested in the UK is an understatement. It is something of a stretch to see so-called “left behind” cities and regions voting to slash corporate taxes and burn all regulations as the last manufacturing industries close their doors, leave town and relocate. To make “Singapore on Thames” a reality you have to assume Tory governments for the next 20 years. I doubt if that is going to happen. Even if it is adrift under Corbyn, Labour hasn’t gone away.
Then there are the small matters of Scotland and Northern Ireland both of which voted to stay in the EU. Neither will be particularly impressed by the plans of English Tories. Scotland will push again for independence while Northern Ireland will become unstable. While trying to negotiate with the EU, and do trade deals with the rest of the world, Johnson would also be fighting to hold the UK together. Battles on several fronts at the same time are never a good idea.
Finally, the EU, if and when it gets around to trade talks with the UK, is hardly going to offer a “great deal”, as Johnson would put it, to a country which is setting out to challenge the EU’s social market model and set itself up in competition as a “pound-shop Singapore”. Even with the best will in the world, where the two sides are trying to get closer to one another, as in the Canada/EU deal, trade talks can take a very long time. The ill will resulting from a “no-deal” crash out will also add poison, as former Irish Taoiseach, John Bruton, argues here.
When the very reason that the talks are taking place at all is because one side wants to diverge, and diverge radically, poor old Rip Van Winkle could fall asleep, wake up twenty years later and still find the sides negotiating.
Pull all of these factors together and what you are looking at is a long period of instability, turmoil and uncertainty in UK politics. The Brexiteer belief that if the UK can just leave the EU on October 31st next all will be sweetness and light in a newly unified nation on November 1 are very much wide of the mark. Years of political and economic turmoil beckon.
Just as Fukuyama was wrong about the “End of History” in 1992, those who suggest that there will be an end to Brexit anytime soon will also be proved wrong.