Finance: Research, Policy and Anecdotes

Brexit – a new season with the same themes

The last season of the Brexit soap opera ended with David Frost resigning from his position as provocateur-in-chief of the UK government vis-à-vis Brussels. The new season has started with Liz Truss taking on the role and repeating the same mantra again: “Brussels, give us what we did not get two years ago or else we trigger Article 16.” Over the past year or so, triggering Article 16 of the Northern Ireland has taken on the role of some golden-calf for the Brexit movement, similar to what used to be No-Deal Brexit and the WTO option.

 

As I have written many times before, Brexit will never quite be done and we can expect many more seasons to come.  There are three main reasons for that: one, the European Union continues to be the biggest geographic and economic neighbour of the UK (I know this sounds like a trivial statement but sitting in London one has to remind oneself of this constantly) and for any UK government, the relationship with Brussels thus has to top the policy agenda. Two, given the obsession of part of the Tory party and right-wing media complex with Europe, this will thus not go away. And even though the Economist reports that frictions within the broader population are starting to heal, the political usefulness of using Brussels as scapegoat for anything going wrong in the UK is still there. Three, the situation in Northern Ireland is far from settled; while the Northern Ireland Protocol is a useful compromise and its overall structure is finding more and more support in Northern Ireland itself, it is far from completely defined and will constantly provide a basis for new arguments between London and Brussels. This tension is further fuelled by the political interests of the unionist movement in the province and the Brexiter movement in London, neither of whom seem to be interested in the practical workings of the protocol, but rather in political symbolism.  These tensions will certainly increase further in the run-up to the next elections in the province in May 2022 and beyond.

 

I can only see two ways out of the Northern Ireland tension: one, a unification of the province with the Republic of Ireland (certainly not an easy process) or, two, the UK moving considerably closer to the EU, becoming a member of the Single Market in goods in all but law. In the short-term, however, neither seems on the horizon, so further tensions are to be expected. Triggering Article 16 will certainly not bring the resolution that Brexiters are hoping for and will certainly not get rid of the Northern Ireland Protocol. On the other hand, Brussels has clearly indicated that any actions by the UK government that go beyond any immediate concerns or needs might trigger quite some strong response by the European Union.

 

Which brings us back to the vicious cycle that the UK finds itself in. As the damage that Brexit has brought on the UK economy is becoming clearer, the incentives to trigger yet another conflict with Brussels as dead cat strategy are rising; this in turn, however, can make the situation even worse (most recent exhibit: U.S. steel tariffs have been lifted for the EU but not the UK, most likely related to the ongoing uncertainty about Northern Ireland the UK government’s plans).  In sum, Brexit has not only made the country poorer, but through an ongoing process of grandstanding and victimhood, Brexiters keeping digging the hole deeper and deeper.