Wednesday, 17 August 2016

Brexit: Four scenarios.

There has been a significant rally in markets, if not yet in business sentiment since the Brexit referendum. Much of this rally is down to currency, as the UK local (stocks with >60% UK earnings) remains down, especially if you measure it in $ terms. But there has been significant relief that the chaos of the first few days didn't last. A remainer with a safe pair of hands promised to deliver. "Brexit is Brexit" became the mantra of the prime-minister after she won in a contest which reinforced the Conservatives' reputation for ruthless efficiency. I doubt May wants to go down in history as the PM who ended the UK by triggering article 50 and precipitating Scottish independence, but nor does she want to go down in history as the PM who "stabbed UK in the back" and split the Tory party for good by refusing to deliver on the referendum result. So she's done, skillfully, what all good politicians do in a tricky spot: Act like a Rugby full-back: take a sidestep and boot the ball into touch.

To this end, David Davis and Liam Fox, two prominent campaigners for Brexit have been given their own Brexit playpens to try and thrash out what they want. They are, of course learning on the job. Brexiteers are the dog that caught the bus: they don't know what to do with it and many of them, like Michael Gove are being scraped out of the tyre treads as we speak. It's clear neither Davis nor Fox have any clear idea what "trade deals" can deliver, or what the single market is, or why it's valuable. But they've been barking their half understood points now for so long, that when asked by grown-ups "what do you mean?" they blink stupidly and repeat the same turgid tropes as if that will solve the many manifest problems that were pointed out at such length two months ago.

Brexit is, remains and was always going to be a terrible idea. This will slowly dawn on the people charged with delivering it. It's going to be very very hard, will require the total commitment of the entire UK state to deliver a good outcome, as well as skilful diplomacy and the goodwill of our European partners. The Brexit Referendum was not binding, it was explicitly advisory. The apparatus of the UK state has little enthusiasm for Brexit: not the civil service, not the PM, not the diplomatic corps and there's little goodwill towards the UK in European capitals. There are a great many who will try to overturn the result. And there is more than an outside chance they (we) will be able to do so. "Brexit" may mean Brexit for now, but no-one's defined Brexit or our post-brexit relationship with the EU. Because "no relationship" isn't an option. 

Several things are already clear: Article 50 is not adequate for the task. Greenland (population: several polar bears) had one issue, fish, and leaving the EU took three years. Do you think the world's 5th largest economy can successfully extricate itself in two after 40 years in the club? No. Article 50 was inserted into the lisbon treaty in order to appease UK brexiteers, and was never intended to be used. (The moral of the story: never try to appease the unappeasable),

Every month, the triggering of article 50 gets pushed back, from "by the end of the year" when May came to power to "some time in 2017". As 2017 draws nearer, and the UK is still no closer to working out what it wants from Brexit, people will realise that the French and German elections will enable the UK to *start* pre-article 50 negotiations with the new Governments in late 2017. This pushes article 50 back to 2018 at the earliest. This is the Head-Banger position: "Article 50, come what may and to hell with the cost".

But once you get into 2018, the UK general election is hoving into view. As should be clear, Triggering article 50 is likely to provoke a recession, and if you want a discretionary recession, it's probably best to get it out of the way early in the parliament. Few parliamentarians want to lose their seats because of an angry electorate being given what they asked for. The electorate's memory is short, and you can take credit for the recovery afterwards. So it is more likely that the Conservatives will go into the 2020 election (which they will probably win comfortably) with a manifesto commitment to trigger article 50 (or leave in some other way) in that parliament. Ironic really, because the person who made the party electable after 13 years in the wilderness asked one thing of his party: to "stop banging on about Europe". His legacy: a decade of talking about nothing but.

And by this point the rest of Europe will really rather want us to shit, or get off the pot rather than having Brexit clog up the machinery of EU governance for another decade. Anger at the UK for having the temerity to leave will have faded, and cooler heads who see a mutually beneficial solution will be best all round, will prevail. Already Germany is making friendly noises about a special UK deal. Martin Roth:
‘Given Britain’s size, significance and its long membership of the European Union, there will probably be a special status which only bears limited comparison to that of countries that have never belonged to the European Union’
This seems reasonable. But it won't be delivered quickly, nor will it be easy to deliver it via article 50. More likely it will be delivered via a new treaty with the EU some time in the next parliament.

By which time the deal we're likely to get is taking shape. And It's looking likely that the best deal on offer was the one we already enjoyed, perhaps with some bone thrown to the UK on freedom of movement. But remember we're talking about a situation in which a New Parliament, unbound by any constitutional obligation to trigger article 50 beyond the manifesto, has negotiated a new deal within the EU. The 2016 Referendum would be ancient history, and there will be calls for the new deal to be put to a referendum because "a mandate is needed". And the madness stalking democracy will have passed. And so if there is a second referendum, this time, remain will probably win. But that happy outcome remains an outside chance.

Article 50 delivered some time this parliament: 20% (& falling)
Article 50 triggered early next parliament: 30%
Leaving the EU, but not by article 50, possibly following 2nd ref on "the deal": 20%
Second referendum on "the deal", remain wins: Article 50 not triggered at all: 30% (and rising).

The longer we wait for article 50, the less likely it will be triggered, the less likely we leave, and the greater the likelihood, if we do leave of a good deal, mutually beneficial to all concerned. Those clamouring for "Hard Brexit", now are mainly Turnip Taliban, obsessed by immigration and unconcerned by the economy. Thankfully, May seems to be in no hurry, the Chancellor said Brexit would take 6 years, and most of the Brexit hardliners have already vomited themselves into an increasingly irrelevant bucket called UKIP. Either way, in or out of the EU we're probably watching the slow-motion betrayal of the most fervent Brexit voters. Their howling at the EU was nothing more than resentment of the modern world, and so they are unappeasable. So there is no point trying to please people who simply voted to smash something people they resent, valued.

This is as it should be. No country which aspires to greatness can for any length of time have its agenda set by ill-educated, elderly losers, waiting to die in depressing hell-holes at the end of the line. Thankfully, with sensible people back in charge, the outlook is improving in inverse proportion to liklihood of Brexit.



9 comments:

david morris said...
This comment has been removed by a blog administrator.
david morris said...

Bless.........

perdix said...

There is no evidence that Theresa May has "kicked Brexit into touch" .The government need time to arrange the staffing for the exit discussions and the new trade deals.

Charles said...

I guess you didn't see that close to 35% of AB, 18-34 voters voted to leave.

Hardly your self created and self-regarding image of what a "leaver" is

Johnm said...

Change "ill-educated-elderly-losers" to "ill-educated-young-losers" then. Same difference. Dumb people voting on the basis of what they read in the grossly biased sociopath-owned press. People who couldn't string a sentence together even by using copy-and-paste. Brexit: Never. Going. To. Happen. At least the way the brexiters wanted. Out, but still in. Maybe with a small bone in their mouth of "limited freedom of movement" (which everyone will ignore: silently)

Gareth said...

I'm sure that for the Establishment to ignore 52% of the electorate will have absolutely no negative consequences whatsoever in the current climate

G. Tingey said...

REAL problems with Brexit: ( = reasons why, at the last moment, although I loathe the EU, I voted "In" )
GIBRALTAR
The Intra-Irish border & the international agreements pertaining to same ....
Do we really want a separate Scotland & razor/Barbed wire along the Cheviots? No, we don't .....

Anonymous said...

Nice to see you show your true patriotic colours, Jackart :)

""Brexit" may mean Brexit for now, but no-one's defined Brexit or our post-brexit relationship with the EU. Because "no relationship" isn't an option."

I wonder how the United States, China and Canada survive. You know, being large economies outside the EU.

Most likely we will just implement WTO rules.

Brexit happened and will progress because the people of the UK want to take a different direction from that the EU wants to take. That’s it.

Project Fear continues, and yet in reality little has changed and little will change because  -  why would you?

The UK will adopt the situation as it is at the moment and then slowly change things over time — like all countries do. There will be a very slow parting of the ways with the EU as they move to a United States of Europe and we move back to being a United Kingdom — a separate union of countries. We will limit immigration — - because that’s what people want to see .

"Those clamouring for "Hard Brexit", now are mainly Turnip Taliban, obsessed by immigration and unconcerned by the economy."

But implementing a points-based system *helps* the economy whether we want to reduce, kepp it the same, or increase it. This has never been a numbers argument. This is about quality. If we impose Tier 2 visa restrictions on all immigration, rather than just non-EU migrants, then we’re likely to get migrants that fly Alan Bennett class.

And that makes all the difference. If, for any given immigration cap, you have fewer low-paid people coming into the country, then that frees up slots for more high-paid people, and that increases the net benefit to the resident population.

"Triggering article 50 is likely to provoke a recession"

Neither will not triggering it save you.

That is incedental. The government can just cut taxes or raise spending to stop any recession. The problem is too tight fiscal policy. Listen you bloody Tory idiots. There will likely be a recession anyway because of your stupid policies and any declines in 'business confidence' may make it slightly earlier and deeper.

So the real problem is the *austerity* and the obsession with deficits.

If you want to stay in power, the fastest way to stimulate the economy is via the action of very strong auto-stabilisers that increase government spending automatically in a down turn and cut back taxation.

Which is why increasing out of work benefits would be the best way to boost the economy without putting individuals in ever greater debt.

And the best approach would be not welfare but to offer everybody that needs a job a job fitted to the person at a decent living wage. £375 per week per person is a rapid stimulus when required.

Peter said...

A poor loser who voted remain. At least one who is articulate, and writes well.

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