Is Britain heading for a no-deal exit?

The biggest complaint about politics from people who run businesses is not Brexit itself, where opinions are divided depending on the depth of relationship with other EU countries, but on the uncertainty. We don’t know exactly what shape Brexit will take and when. One businessman explained to me, last February, that it was impossible to prepare for the impending departure date of 29 March because he didn’t know what he was preparing for. That date has come and gone and the uncertainty has just got worse.

The new crunch date is 31 October, and attention has moved on to the contest for the Conservative leadership, as this will almost certainly determine who will be our next Prime Minister. Both contenders, Boris Johnson and Jeremy Hunt, maintain that achieving Brexit on this date is their main aim. What is less clear is how much of a rupture either man would be prepared to risk to achieve this goal.

Mr Johnson is the strong favourite but his campaign is not going smoothly. Mr Johnson has never presented himself as being a slick operator, so this is not particularly damaging of it itself. But his strategy to date has been to say as little as possible, to allow a wide spectrum of Conservatives to project their wishes into the vacant space. To hard Brexiteers he has promised to take Britain out on 31 October come what may. Those who would rather delay than suffer a full rupture detect some flexibility. Attacks on Mr Johnson both on his private life and his Brexit stance have forced him increase the level of press exposure in order to help recover the initiative. That has forced him to reveal more of his thinking, but this has not helped us very much.

What he has shown is a breathtaking optimism. He says both that a new deal is perfectly feasible in the time, and that a no-deal does not mean all that much rupture in fact. This sheer candy floss, sweet-tasting but disappearing on contact with anything solid. For his main audience, the Tory membership, this is fine. They are fed up with the consistent pessimism they hear from critics of Brexit, and appreciate the ray of sunshine that Mr Johnson provides. But what does it actually mean?

Commentary on the various Brexit strategies coming form the Conservative leadership candidates is relentlessly negative. I largely share this scepticism, but I don’t feel there is much point in repeating it. Critics of Brexit tend to programme out more optimistic scenarios. But if we are to understand more clearly what might happen we should not dismiss the optimistic gloss so easily.

The first possibility is that a Withdrawal Agreement will be agreed by 31 October, and that it will get through parliament. The first problem is that both leadership contenders say that it needs to be changed from its current form, but that the EU side has said that it is unchangeable. The second problem is that there is very little time to agree and implement something different. But the EU fears the full rupture too, so something might be done that saves face on all sides. This might pass parliament because Brexit supporters realise that trying for the no-deal alternative leads to further delay, which plays into the hands of the Remainers. The deal cannot be much different from what came before, but there may be more Conservative solidarity, and Labour discipline might start to crack. This seems to be Mr Hunt’s game-plan. It could work. But the odds are against it. It has been tried before, by Theresa May, and the EU called the British bluff successfully. They will be tempted to do so again giving the British prime minister very little to play with.

The second possibility is what might be called a no-deal no-rupture Brexit on 31 October. This seems to be Mr Johnson’s big idea. At first sight it is nonsense. Any kind of no-rupture, with a transition period where little practical changes, requires a deal of some sort. But what of a small-deal small-rupture Brexit? This would involve the transition period as specified in the original Withdrawal Agreement, the target of a Canada-style free trade agreement, with WTO arrangements as a fall back. The other details. such as Ireland and the money, will be worked out later. What’s in it for the EU? There would be no rupture, or at any rate a delayed one, which would remove a big headache, especially in Ireland. The UK would no longer pollute EU institutions such as the European Council and the European Parliament. They would get at least some of the money envisaged in the original Withdrawal Agreement.

Would the EU buy it? Of course it is a renegotiated Withdrawal Agreement by other means, with the Irish backstop removed from it. And there is not much time to negotiate it. That’s a big problem. The more of the original agreement is grandfathered into the new arrangement to save time, the more of a humiliating climbdown it would look for both the EU and the Irish government. There needs to be a large dollop of something from the British government to compensate. At the moment I really can’t see what this would be. Mr Hunt’s plan looks a much better bet.

But the question remains how far Mrs May’s successor is prepared to risk a full no-deal rupture. This still seems to scare a lot of people. The threat of large agricultural tariffs on exports to the EU, including over the border in Ireland, is a big deal for people that Tories care about. And there remains the chance that parliament could sabotage it by bringing the government down.

That leaves a wide spectrum of possibilities, from remaining in the EU after all, with or without a further referendum, all the way towards a full no-deal rupture. And each of these possibilities has a significant probability. Meanwhile the opinion polls show four political parties each with about 20% of the vote, something that would make the outcome of any election highly unpredictable. There is no relief in sight for Britain’s businesses.

2 thoughts on “Is Britain heading for a no-deal exit?”

  1. @ Matthew,

    You’ve included the word business in both your first and last sentence and backed it up with what a businessman has said to you about the uncertainty. I actually run a business in the UK having set up a similar and successful business in Australia a few years previously so I suppose that makes me one too.

    However, I’d say it’s largely missing the point to analyse the Brexit crisis in purely business or economic terms. It is a factor but it is not the only factor. Probably not the biggest factor. A common line runs that the Northern, and maybe the Welsh and SW, working classes tend towards Brexit because they have missed out on the benefits going disproportionately to the South East. However anyone caring to do some research will find that many Northern working class Brexiteers are actually doing quite well. Many others might live in in the South East in places like Kent and Essex.

    There does seem to be a kind of unholy alliance between the working classes and the right of the Tory party that can only be fully explained by a more overt and less self conscious patriotism which both share but which is perhaps frowned up by those who might be described as the centrist middle class intelligentsia.

    I’m not at all immune from such feelings myself. I might be on the left, republican and have been known to have quoted Samuel Johnson on patriotism and scoundrels etc but deep down I do feel British and not at all ‘European’. So maybe all my arguments about the stupidity of the euro, lack of EU democracy etc are just a cover for that?

    I don’t want Britain to be swallowed up in the future European super state and if I’m being perfectly honest I’m quite pleased that the EU is such an easy target for criticism.

    There’s nothing particularly wrong with feeling European. Those that do will likely be remainers. Those that don’t won’t. The economic benefits of, say +/- 10% either way, won’t though be the deciding factor.

    1. I would agree with that. Both sides often say they are in favour of business, but my point is that in fact they both trample over business interests pretty quickly. Remainers continue a guerilla war of resistance and delay and propose a further referendum: which prolongs the uncertainty of which business people with export or investment links complain about. Leavers move towards a hard Brexit model that these businessmen usually hate.
      On the wider point I do think that most of it is about identity. Remainers often talk as if the fundamental problem is the economically left-behind. I don’t want anybody to stop anybody being concerned about people who are economically left-behind, but I think it is more cultural than economic. A lot of Leavers are distinctly well-off.
      There can’t be many people who are more deeply English than me, but I have long felt a strong European identity. I don’t know where it came from, but I know that I had it when my family moved to Jamaica for a couple of years when I was 10. “European” was “not American” – I suspect that was a driving factor, but I also found a lot of English attitudes inward-looking and parochial. But I’ve always understood that my European identity was a minority thing. Ironically only now are there signs that this may longer be true, or not in the foreseeable future.

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