Winner of the New Statesman SPERI Prize in Political Economy 2016

Monday, 9 April 2018

The complete failure of the Brexit project


The Brexit project is already a complete failure. That statement may seem odd, as we are less than one year away from leaving the EU. But what happens in March 2019 if all goes to plan? We leave the EU, but remain in the Single Market (SM) and Customs Union (CU). It is not Brexit means Brexit, but Brexit in name only (BINO). All the UK ‘gains’ is the inability to influence the rules and laws we have to follow as part of the SM & CU.

If the Brexiters were being honest, the transition is worse than not leaving. Not only do we lose the sovereignty they perceive as a result of being in the SM & CU, but we also lose our current say in how the SM & CU are run, and we still pay into the EU budget. In sovereignty terms that is going backwards. Free movement continues, although again if Brexiters were being honest they were never too worried about immigration: that was just a hook to catch voters with. But all the things that Brexiters do go on about like freedom to make trade agreements with other countries are impossible during transition.

Brexiters may well convince themselves that transition is just an embarrassing phase before their new dawn. They can only do that because they have never concerned themselves with details, whether those are details about how trade works or details about negotiations. The reality is very different. There is no solution to the Irish border problem except staying in the Customs Union and Single Market for goods.

Will the EU be prepared to accept the ‘Jersey option’, which means splitting the Single Market (UK in for goods and out for services) and allowing an end of free movement? That may appear to others as if the UK might be better off after Brexit, which breaks one of the key EU requirements of any deal. As we have learnt from the last year, if the EU does not want something it does not happen. Leaving with No Deal is no longer a threat, so it may be quite possible that the EU may simply say the only feasible solution, if the UK does not want a border in the Irish Sea, is to stay in the complete Single Market and Customs Union. With a hard deadline for the end of transition leaving little room for negotiation, the UK may have little choice but to agree to BINO, or something very close to it.

The alternative is that the EU creates an extended transition. But if they are unwilling to allow the UK what it wants, this amounts to the same thing. The only cost to the EU of perpetual transition is pretending to negotiate. The UK government will continue the pretense because it is too embarrassing to admit defeat. The result for the Brexiters is the same: staying in the CU and SM with no say. 

If you think that could not happen without a revolution on the Conservative right, watch how Gove and Johnson are already backing down on all their past red lines. Will not voter pressure (aka. the right wing press) demand that May cannot agree to continuing free movement? By 2020, when the final deal will be negotiated or postponed, immigration from the EU may have almost disappeared as a result of slow growth in the UK, sterling remaining weak against the Euro, and continuing uncertainty about the final deal. Net EU immigration is already less than half non-EU immigration.


It is no surprise that the Brexit project has failed and failed so utterly and completely. It was based on a fantasy about UK power. According to this fantasy the EU would be desperate to let the UK continue to trade with the EU on current terms and would turn a blind eye when the UK no longer obeyed the rules of the Single Market and Customs Union. The reality is that the EU has not been willing to destroy the Single Market and Customs Union just to keep exporting to the UK. The moment it became clear to Brexiters that their fantasy was just that, the only way that they could gain the sovereignty they craved and promised was to leave with no trade deal.

But that idea was also based on the fantasy that trade with the EU could be easily replaced with trade agreements with other countries. Nearly every expert said at the time these ideas were nonsense, and nonsense they remain. No government would ever knowingly do so much damage to its economy. The moment the government’s own analysis confirmed what outside experts had said before the referendum, No Deal was off the table. Mr. Fox will still have a job: not making new deals but trying to convince the many countries that currently have trade agreements with the EU that they should still trade on the same terms with the UK after we leave.

As I write the paragraph above there is a part of me that says surely no one could have been that foolish to believe those things. Surely there must have been more behind the accusation of Project Fear, and the fact that over 40% still believe they will be better off after Brexit happens. But in truth there was nothing more profound. Look at the desperation of Brexiters over the Irish border, claiming that none is needed when they originally campaigned to take back control of our borders.

Of course none of this will prevent the Brexiters celebrating their independence day in March 2019. They love the symbolism, and they will do a good job in persuading the BBC that something has been achieved. They have too much political capital in Brexit being a success. Key Brexiters will prefer to party rather than complain, particularly when there is still the prize of the party leadership to win. But the reality is that in March 2019 we become what Rees Mogg calls a vassal state in the short term for sure, and probably in the longer term as well. 

There has been some debate recently among those who understand what is going on about whether Remainers should give up trying to prevent March 2019 happening and focus on getting the best Brexit terms. It is, as Ian Dunt says, a false dichotomy: there is no conflict in doing both. But if there is an exception to that, it lies with the Conservative rebel MPs. If they can see that Brexit will end not with a bang but a whimper, they may well decide that it is not worth being branded traitors by voting against the withdrawal agreement. That, not Corbyn, is the most likely reason why March 2019 will happen.

Of course there are mistakes the government can make before March 2019. But if Brexit happens, it will not even be a token victory for the Brexiters. For them, BINO or something close to it is worse than EU membership, because we gain nothing and lose a seat at the table. Their fantasy dream of Global Britain has in reality made Britain more insular, more powerless and less influential than at any time in centuries. Nor is there anything to celebrate for Remainers here. Economic damage has already been done, and will continue to be done because BINO is a more uncertain state than EU membership and because of less EU immigration. Years of the UK’s political life will have been spent finding out that the scheme of a small number of politicians and press barons was the folly experts said it would be, and then pretending it was not.



14 comments:

  1. When Nixon visited China in 1972 he asked Chou en Lai about the impact of the French Revolution and he replied: "It's too early to say".

    To write off Brexit only after nearly three hundred years may be unreasonable but to write it off before it has even started would almost certainly be regarded as little more than hyperbole.

    The truth is that we will not know what the effect will be for at least twenty years I would say and, by the end of this time, I suspect that your piece will be proven wrong to the point where it is viewed as odd. Both the UK and the EU will change substantially during this period and I believe the EU will not be here in its present guise and I would not even be surprised if the UK were not then part of a European grouping whose contours we can only speculate about now.

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  2. " But what happens in March 2019 if all goes to plan? "

    I think I've said this before on this blog:

    There will be parties on Brexit Day. They will have all the appearance of being spontaneously organised by Leave-voting members of the public and they will get massive coverage in the right-wing press.

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  3. Brexit is the total humiliation of the UK.

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  4. My sentiments exactly..my 30 years in freight/logistics made it obvious to me we could not leave the SM/CU from a purely practical infrastructure perspective alone with out causing disaster capitalism at its finest. The same leaving the SM/CU also makes it automatically impossible to avoid resurrecting the Irish border

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  5. "That, not Corbyn, is the most likely reason why March 2019 will happen"

    A curious either/or given that in the previous paragraph you noted Dunt's pointing out a false dichotomy.

    Corbyn contributed, as did all who have aided him.

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  6. NICK GREENWOOD9 April 2018 at 07:07

    The above reads like a Remainer bleat by an academic economist, the ones who usually get things hopelessly wrong!

    The Remainers, needing to project post Brexit GDP outcomes have to adopt debateable and flawed ECONOMIC MODELLING or scenarios, rather than serious research - because there is NONE!

    There are stats as trotted out on a regular basis by the BoE and OBR. They take a wide input of variables which provide a wide range of outcomes; they then create a fan chart and tend to opt for the median whilst scaring with the periphery.

    The result is the type of hocus pocus Treasury forecasts pedalled by Osborne ahead of the Referendum; and we know thankfully how that turned out! The piece above is of that ilk.

    Can Simon Wren show me one, just one plausible and peer accepted piece of research to support the Remainer claim of a parlous effect of Brexit on the UK economy. I searched for any such ahead of the Referendum in Jun'16, but came up empty-handed. I am still looking...
    There was however plenty of well researched commentary to the contrary - The Civitas & Bruges Group reports being just two.

    No, what I am looking for is proper in-depth and argued research as to why/how Brexit will penalise the UK economy. As I said above, plenty of excellent research the other way; but if Simon Wren can point to equivalent research showing a negative outcome - please enlighten me.

    Regrettably all we ever get is meaningless conjecture, which can be construed in the way this distorted piece does in trumps!

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  7. Simon, I would make two points.
    I am not sure that BINO is as (almost) inevitable as you suggest. It is the complete abandonment of the UK's negotiating position and goes against what both the major UK parties say they want. JC has just dismissed OS for disagreeing with the Party line on this. Of course, that does not mean that BINO will NOT be the outcome. Just less likely than you imply.

    On the other hand, assuming BINO does happen, I think your already pessimistic assessment is too optimistic. There will be massive disaffectation on the Leave side. A rich seam for populists to mine ("stab in the back"). The already enduring and poisonous UK "debate" on Europe will drag on and quite possibly get even more bitter. I am not sure that BINO is, to borrow from macroeconomics, a politically stable equilibrium. Because of this I am not even sure that, in the longer run, it is in the interest of UK remainers. (And I tend to be sceptical of that type of short-term pain for long-term gain argument.) I wonder whether a harder Brexit, economic damage, and then a clear re-think (and re-accession) would not be better. (Yes, I realise it is easy for me personally to say that.)
    Sincerely A.

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  8. Tory party unity has been maintained. Brexit has therefore been a success, so far.

    The Brexit referendum was called to maintain Tory party unity. The extend and pretend negotiation strategy is designed to avoid a Tory party split. The goal will be to continue this strategy as long as possible.

    There is a good chance that fudge can be maintained up to a 2022 election. The UK will be closely aligned to the EU but will have some optional trigger to bring about a more dramatic separation which may never be used.

    A Tory party split could happen at any time, but is by no means inevitable.

    Many UK governments have done terrible damage to the UK economy and living standards, its par for the course.

    EU migration to the UK has come down because of the devaluation of the pound against the Euro and the slow recovery of some of the EU 27 countries. This could have happened anyway without Brexit. EU migration to the UK could be more determined by what happens with the Eurozone economy than Brexit.

    Why do voters think the UK may be better off with Brexit? Brexit has shaken up the political system a greater variety of policy options are now getting an airing. The overton window is slightly ajar.

    The UK badly needs to spend about 9% or 10% of GDP on health care starting immediately. The most recent chance the electorate got to vote for increased health spending was Brexit.

    The Tory party is still in power. In Tory party terms May has done an excellent job so far. May's position is therefore sadly secure.

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  9. How many times must May say that Britain will leave the customs union and Single Market? You're clinging to some sort of fantasy about the Irish border, when in reality an agreement about zero bilateral tariffs and on animal & plant sanitation standards would probably suffice.

    In any case, whilst a no-deal in March next year may have caused problems, by Jan 2021 companies will have had a notice period longer than WW1 and viable affected companies in almost all sectors will have adjusted. We are already seeing subsidiaries being set up on both sides of the Channel to maintain access to the other's market, we're seeing significantly more domestic sourcing on both sides of the Channel, we are seeing British companies diversifying into RoW markets, we will presumably see the end of the Rotterdam Effect. Who knows, perhaps people will even notice that Dover is not our only port. We are therefore seeing the decline of vested interests in the status quo.

    You'd need a heart of stone not to have concluded from the referendum period that diversifying away from the EU is an urgent national strategic goal, because so many people went into hysterical panic at the economic consequences of withdrawing from the EU, and no sovereign state should ever see that phenomenon both from a humane point of view and for the sake of democracy not being poisoned and warped by fear.

    So no, Brexit is working because we will leave the SM and CU whatever happens, under any circumstances leaving after the transition period would be comparatively painless, and we're reducing our dependence on the EU.

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  10. I honestly wonder if they'll be able to go for BINO, and still convince their constituents that they accomplished something.

    The way I imagine it is this: they proclaim a successful Brexit, and point to the improving economic conditions which will likely to be a consequence of coming to an agreement on staying in the single market.

    As long as they can control the media message, this shouldn't be all too hard. So my question is: will they be able to prevent acceptance of the counter-claim that the UK has not really left, but only eliminated its influence in the EU?

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  11. "Nor is there anything to celebrate for Remainers here. Economic damage has already been done ... because of less EU immigration."

    I agree that Brexit will be costly for the UK, but not for the reasons you say. Remainers did not make a convincing case to say why the very dramatic increase in EU immigration became suddenly so necessary. Many people in many parts of the country have a right to question what they have gained from such immigration - especially since there has been a long period of relative, and even absolute, decline in many parts of Britain. Elites have to try and understand the indignity and insecurity of having to go to high cost areas of Britain and compete with seemingly endless supplies of low cost labour, and feel like a foreigner in one's own country on a building site. Of course these people feel that the elite that love Europe couldn't give two hoots.

    Hopefully one thing that comes out of this is that the elite start asking the real questions of what led to Brexit - why there was so much disenchantment and resentment that enough people could vote out - rather than blaming red herrings like Press Barons (or even austerity policy).

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  12. Dear Simon

    You write:

    "But all the things that Brexiters do go on about like freedom to make trade agreements with other countries are impossible during transition."

    In an agreed green section of the draft WA, it says:

    "Notwithstanding paragraph 3, during the transition period, the United Kingdom may negotiate, sign and ratify international agreements entered into in its own capacity in the areas of exclusive competence of the Union, provided those agreements do not enter into force or apply during the transition period, unless so authorised by the Union."

    So, it is misleading for you to state the UK cannot "make trade agreements" during the transition.

    I think there's a case for tweaking the post to ensure your readers aren't misled.

    Cheers

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  13. I'm afraid this is all very depressing as no one with any influence will commit to a second referendum.

    Indeed in your previous articles you have even said yourself that due to the extension of the final deal outcome into the transition period after formal leaving that isn't really on the table - I foresee the only end will be leaving to some half baked (or overdone?) mess.

    Probably ending with an application to rejoin by a relatively impoverished UK (GB?) some years in the future who will as part of the deal accept Schengen and the Euro.

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  14. As has been noticed by the perceptive watchers of Trump, the place where he has been most active in alliance with his party is in the appointment of judges.

    Where British Conservatism through Brexit is identical to American Conservatism is in its driving obsession about separating the UK from laws not wholly made in the UK.

    As such, trade deals are a part of this Conservative legal push, but only a part.

    If the UK Conservative Party is going to implode in the coming months it will be over the law.

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