I am generally in favour of birthday parties. But, with Brexit, which anniversary are we “celebrating”? This month is the first anniversary of the TCA (the UK-EU Trade and Cooperation Agreement: the “deal” concluded on Christmas Eve 2020).
It is also the second birthday of “getting Brexit done”: the ineluctable consequence of the 2019 general election, which secured a parliamentary majority for the withdrawal agreement. For Brexit’s true believers, it is also a diamond jubilee: celebrating opposition to a national journey down a cul-de-sac, which began with talks to enter the European Economic Community 60 years ago.
Is it a celebration or a wake? An Opinium survey suggests that 60 per cent of people think Brexit has gone badly – or worse than they expected – while 42 per cent of Brexit voters share this essentially negative assessment. But that is not the last word (it rarely is where Europe is concerned). “Badly” means different things to different people.
It has always been the case that support for Brexit (and for Remain) came from across the political spectrum; from people with very different objectives and prejudices. I am a veteran of the debates.
On the pro-European side were “One Nation” Tories, Liberals, and Labour Social Democrats. On the Eurosceptic (or Europhobic) side, Tory rebels like Enoch Powell, socialists like Tony Benn, and firebrand Ulster loyalist the Reverend Ian Paisley. The current Brexit coalition – including those expressing disappointment with Brexit – continues to want very different things.
Some expected Brexit to bring immediate benefits, such as more money for the NHS, and more, better-paid jobs freed up by departing Poles. Some saw long-term benefits from rebooting Britain’s economic and social policies (in different, sometimes contradictory, ways). Others regarded the economic agenda as irrelevant to fundamental principles around sovereignty: “taking back control” of borders and laws.
For those in the last group, Brexit is already a success because it happened, and regardless of its consequences, it restored their trust and confidence that government would deliver what they voted for. The British Social Attitudes survey by Sir John Curtice and Alex Scholes showed how powerful this sentiment was among Leave voters.
But that was before the recent collapse, more widely, in trust and confidence in this government. Sir John’s latest analysis of polls suggests that the 74 per cent of Leavers who voted Conservative has shrunk to 53 per cent, but they are not yet securely attached anywhere else.
We now have some real data to evaluate the short-term economic impact of Brexit. But it is very provisional, and incomplete, and difficult to interpret in the context of so much else: notably Covid restrictions, an energy shock, and supply chain disruption, affecting trade flows.
The Centre for European Reform uses a model that suggests – based on other countries’ performance during Covid – that in October, total UK trade in goods was about 16 per cent less than it would have been had we not left the single market and customs union.
Separate data on services trade shows that, between April 2019 and April 2021, services exports to the EU fell twice as heavily as non-EU exports – and there was a similar, proportionate cut in imports.
Since services trade is especially dependent on freedom of movement, there has been an immediate impact – for example, on creative industries, whose performing artists can no longer circulate on European tours. The biggest blow to affect services has yet to fall: Lord Frost’s failure to negotiate any long-term meaningful equivalence for UK regulation on financial services will enable EU financial centres to pick off lucrative bits of British business.
The full economic impact of Brexit is only just beginning. Many of the border checks and inspections set up to police the common standards and regulations of the EU single market are yet to be implemented. And so far, there has been little move from the UK side to diverge from the standards of the EU.
Some industry groups, as in the chemical industry, seem to have successfully warned that there will be unnecessary costs to firms and consumers from the creation of separate UK standards, the purpose of which is merely to display a union jack. The biggest “successes” of Brexit so far have been to negotiate the unchanged “cutting and pasting” of trade agreements with non-EU trade partners.
Therein lies a paradox that troubles many Brexiteers: if “success” is avoiding the costs of divergence, why did we leave in the first place?
There has been one single, concrete step to demonstrate Britain’s new independence: establishment of immigration control over EU workers, governing their admission under a points-based immigration system. The consequence has been labour shortages, especially of lorry drivers. A shortage of seasonal fruit and flower pickers now looms.
Putting together all the fragments of evidence and anecdote, the most plausible estimate of overall trade costs is that of the Office of Budget Responsibility: a permanent loss – an indelible scar – of around 4 per cent of GDP.
Even that fails to consider the cumulative, long-term malaise that will set in once global companies conclude that the UK, outside the EU single market, is no longer a very attractive destination for footloose investment.
The more thoughtful Brexiteers have long understood this risk, and they advocate a new, more entrepreneurial, open, competitive economic model. But that is at odds with the instincts of other Brexiteers, who want a much more statist, interventionist government.
The absence of a coherent post-Brexit economic strategy seems to have been one of the reasons for the resignation of Lord Frost as Brexit negotiator. Another undeclared reason was that he could see the hopelessness of trying to unpick the Northern Ireland protocol that he and Boris Johnson had negotiated, creating a regulatory border between Britain and Northern Ireland: an issue that has destabilised the delicate balance of political forces in the North.
Continued confrontation with the EU will lead to further poisoning of relations with Europe. In turn, progress on the numerous outstanding post-Brexit technical issues (financial services regulation being key) will become more difficult still to attain. An effective trade war would inflict great damage on economies already weakened by Covid, and as the smaller player, the UK would be the big loser. UK obduracy also infuriates the Biden administration, and weakens the “special relationship” with the US.
The inevitable alternative is to capitulate on the big regulatory questions, and to accept the inevitable drift towards a de facto reunification of Ireland. Lord Frost didn’t want to stay around for the surrender.
Instead, that dubious honour has fallen to the foreign secretary, Liz Truss. It is just possible that she may be able to turn a political disaster into an opportunity. Wider political and security cooperation with Europe has largely vanished, having been excluded from the TCA last year.
The commission president pointedly excluded any reference to the UK from her recent hour-long annual address. Yet Britain’s intelligence and defence capability could be a key contributor to shared European endeavours, like deterring Putin’s Russia.
A bit of seasonal goodwill, and a willingness to engage positively, would go a long way to thawing relations with Europe. It is more than possible that Boris Johnson may be ready to go along with doing so, reinventing himself yet again – this time as a statesman – in the closing period of his premiership.
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The Brexit fundamentalists would merely be the latest of his friends and causes to be jettisoned once they have outlived their usefulness. He could conceivably resurrect his second, initially unpublished 2016 essay in which he rehearsed the arguments for close European cooperation.
Whether that happens will depend in part on whether Ms Truss decides to help her boss perform some political gymnastics in the national interest, or to appeal to the nationalistic, gut prejudices of the small club of geriatrics who make up the Tory party membership.
Since the latter is the electorate that chooses the next leader of the Conservative Party and the prime minister, she – like Boris Johnson in 2016 – will find herself choosing between statesmanship and political success.
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