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Heavy Brexit Turbulence Ahead
23 Oct, 2017

The current consensus amongst leading commentators is for extreme outcomes from the Brexit negotiations: either we crash out with no deal, or we remain in the EU. The possibility of a ‘soft’ Brexit appears to be receding. Nick Hopkinson, Chairman considers the consquences.

The Prime Minister could have united the nation at the outset of her premiership. Instead she squandered her authority on pandering to the ideological EUphobes on the right of her party and an empty appeal to the ‘Just About Managing’. She has done little for the latter because she is in the pocket of the former. Proposing to leaving the Single Market and Customs Union may have helped keep her in Number 10 in the short term. However a ‘soft’ Brexit based on the existing off the shelf Norwegian model might have been more sustainable politically in the longer term.

Meanwhile, the Brexit negotiations with our European Union partners (not ‘enemies’) mark the point where Brexit fantasy meets and is transformed by reality. Negotiations expose ‘hard’ Brexit as a deeply flawed policy which is not feasible in practice without considerable damage to our economy, national unity and foreign relations.

‘Hard’ Brexit is unravelling over thorny issues such as the Irish border and money. Rarely is anything more sensitive in international negotiations than taxpayers’ money. Brexiters thought Germany would come to the UK’s rescue given its large trade surplus. However, if we recall Germany’s firm stance on Greece’s debt, the power of Treasury debt collectors in international negotiations should not have been underestimated.

As many candidate countries seeking to join the EU know from accession negotiations, we shouldn’t expect any generosity from it. Economic size matters. The word ‘negotiations’ is effectively a misnomer. Candidates either accept the EU’s acquis of 150,000 pages in toto, or leave it. Only minor derogations and a few transitional periods may be possible. We are the smaller demandeur, a situation further undermined by the absence of an agreed post-Brexit vision of a weak and divided Government.

The Government seems to think that threatening to walk away from negotiations makes the UK more credible. On the contrary, it makes us less so. This is not a business negotiation. Nor is leaving the same as a divorce. The UK needs to have a continuing relationship with and international agreements with the EU.

We are simply not prepared to progress the negotiations, let alone implement, Brexit. Article 50, which was signed by the UK, deliberately made leaving the EU difficult. This is particularly the case in the field of trade. The longstanding myth that we can simply ‘fall back on World Trade Organisation (WTO) rules’ has been repeatedly exposed as false. Most recently, the US, Canada, Australia and four other countries have objected to the provisional agreement on dividing existing EU tariff quotas.  

So instead of Brexit bringing an extra £350 million a week to the NHS, the Government is now budgeting £250 million in an attempt to make Brexit work. This is just the tip of the iceberg. According to a senior source quoted by Lord Adonis, 70% of civil servants are addressing Brexit related issues. Reportedly each time an issue is addressed, another one with Brexit implications is uncovered. Brexit is hijacking, if not paralysing, the functioning of government. As tax receipts fall, the Government is even less able to resolve our major health, welfare, housing and social problems. Rather than providing a solution to our country’s problems, Brexit is only making them worse.

Thanks to the courageous Gina Miller and her Supreme Court case, and May’s unnecessary 2017 General Election, Parliament’s role in the Brexit process is enhanced. Already 300 amendments to the Government’s EU Withdrawal Bill have been submitted. The Government has delayed discussion of the Bill yet again, not only because of the volume of amendments, but also because it fears it doesn’t have a majority for it to pass in its current form.

Some Conservative backbenchers are leading the charge to amend provisions giving excessive powers to the Executive rather than Parliament. Labour, emboldened by the belief that the Government can be defeated, are demanding a vote should the Government fail to conclude a deal. The SNP is demanding promises to devolve ‘repatriated’ powers are honoured. There will be considerable cross party pressure to remain in the Single Market, Customs Union and Euratom. The Liberal Democrats will continue to press for a referendum on any deal which the Government may conclude. With a minority Government, the House of Lords will not feel bound by the Salisbury Convention, so it too can be expected to propose and press several amendments. A joint Commons/House of Lords group is due to announce at the end of October when and on what Parliament can vote. Assuming there are votes on these issues by the possible March 2018 timetable deadline, parliamentary insiders believe there are majorities for a handful of key amendments.

As the economic pain of Brexit becomes more apparent, public sentiment is gradually changing. Jeremy Corbyn is not far behind. After half-heartedly campaigning for Remain during the referendum campaign, Labour is gradually shifting its Brexit stance to advocating a softer Brexit, most recently staying in the Customs Union and Single Market during a transitional period, and not ruling out permanent membership of both. That he recently suggested he would vote Remain again in a hypothetical referendum is another welcome, albeit small, signal. In light of Labour’s fluid stance and a possible Government collapse, a few parliamentary insiders are now even saying quietly we might on balance remain after all.

If politicians do not reverse Brexit, markets very well might prompt a political crisis. Any collapse, even pause, in negotiations could be greeted by a second major drop in sterling, with its resulting negative impact on inflation and living standards. If there is still little or no business-friendly progress in the negotiations, business will start shifting more sizeable chunks of their operations in early 2018. International investment banks will be in the vanguard. Less visibly, foreign investment into the UK is already slowing. 

We cannot however rely on political and economic forces to defeat Brexit. We need to do so ourselves. Remainers must be as dedicated, hard working and bloody-minded as the ideological EUphobes. They have been empowered by widespread ignorance, misinformation, apathy, and nativism, all egged on by right wing non-dom press barons. We have seen how a dedicated few can skew a national debate, and now we, as the remain majority, must do the same. We must continue to lobby our MPs; organise; march; write articles and letters in the traditional media; be active in social media; talk to our friends, family, colleagues, neighbours and strangers wherever appropriate, and join and fund pro-European groups.

Whether we crash out, negotiate a worse deal than what we enjoy now as an EU member, or ultimately remain in the EU, we must be braced for further, and worse, turbulence. The unfolding drama will be gripping, but it is sad and unnecessary. Fortunately, the tragedy is still preventable. We therefore owe it to our country, London and our families and fellow citizens to #stopbrexit before it is too late. All that is necessary for the triumph of Brexit is that good people do little.

Nick Hopkinson
Chair, London4Europe; Chair, European Movement Branches Forum;
Former Director, Wilton Park, Foreign and Commonwealth Office
18 October 2017

Twitter: @nickhopkinsonEU