Finance: Research, Policy and Anecdotes

Brexit-more action, same themes

It is always insightful to look at Brexit from a safe distance, such as Santorini where I spent the last few days relaxing. As the Brexit soap opera races towards its next season finale, many of the same themes that have become so familiar over the past 3.5 years are being revisited. And from the outside, the Westminster debate looks as ridiculous as they have over the past years, with politicians seeing Brexit as the response to a question they have forgotten. 

 

First, the Brexit trilemma is alive and kicking, with the UK wide backstop negotiated by Theresa May replaced with a Northern Ireland front-stop, taking NI effectively out of the UK customs union and internal single market. As repeated ad nauseam by many observers, only two out the following three can be achieved: no border in Ireland, UK leaving the European customs union and Single Market, and no border in the Irish Sea.  The last one had to give under Johnson’s deal, resulting in a rude awakening for the DUP who felt themselves let down not only by the Tory government but especially by the Brexiters in the ERG. 

 

Second, the utter incompetence of Tory ministers has been proven again, such as when not being able to respond whether or not there would be customs control between Great Britain and Northern Ireland (yes, there will be and they will not go away with a Free Trade Agreement between the UK and the EU as some suggested). Also, the idea that this FTA can be negotiated within the next 14 months of the transition period is on the same level as the prediction that it will be the easiest trade deal negotiated in human history. 

 

Third, the idea that Brexit will help take back control. Once Article 50 was triggered, all control was with the EU, including the option to avoid no-Deal (better described as Crash) Brexit. The same will repeat itself at the end of 2020 when the extension of the transition period has to be agreed on. And this daunting cliff will also put the UK in a weaker position during the trade negotiations. But, yes, the UK has had enough of experts who have pointed this out for the past 3.5 years!

 

Fourth, the idea that once Brexit has been “achieved”, it will all be done, the nation can find again together and the government can turn its attention to more pressing issues. The simple fact that post-Brexit the relationship of the UK not only with the EU has to be redefined, but also trade negotiations with many other countries will be informed by the future UK-EU deal tells us otherwise.  The anger on the Remainers’ side if and after Brexit happens will not go away.  Add to this the anger of Brexiters who will not get to see the blooming landscapes promised in 2016. And the continuous negotiations with the EU will give lot of opportunities to Brexiter politicians to grand-stand, threaten with the Royal Navy, appeal to the German car industry etc.

 

Can Brexit still be avoided?   Johnson has certainly been poorly advised over the past months.  He could have gotten his deal through Parliament, if not by Halloween, then by mid-November or so. But he certainly behaves like a spoiled toddler who keeps throwing his toys out of the sandbox if things do not go exactly his way. The opposition is as hopeless, I should add!  Yes, they got together to prevent a Crash Brexit. But the obvious consequence - link the new deal with a confirmatory referendum - seems not to be part of their agenda; Remainers obviously want a referendum as a last chance to reverse Brexit before it happens, but sensible Leavers (i.e., politicians who originally were in favour of Remain, but feel obliged to implement the result of the 2016 referendum) should clearly see that only a referendum will be able to settle the issue in a democratic manner, much more than a general election. 

 

As so often before, it is hard to predict what will happen next. It is unlikely that there will be Brexit next Thursday, but apart from that, many things can happen, including a General Election. And even as the EU and its member countries’ governments are losing patience with the Westminster chaos, they are unlikely to pull the plug!  Although the arguments stay the same, there is lots of new excitement to be expected in the last two months of 2019.