Risk & Economy » Brexit » Brexit Day seems as distant as Powehi

Brexit Day seems as distant as Powehi

The recently photographed black hole 55 million light years away seems closer than a Brexit deal, says Christina Anderl, economics lecturer at London South Bank University.

Friday 12 April 2019 was supposed to be ‘Brexit Day’ but Brexit currently seems about as distant and elusive a goal as ‘Powehi’, the recently photographed black hole 55 million light years away in another galaxy – the difference being, that we’ve had sight of the black hole – of Brexit not so much.

It is now 746 days since Theresa May triggered Article 50 and the outlook for the UK leaving the EU is still rather gloomy: the terms of leaving have not been finalised let alone agreed in Parliament.  EU and UK citizens have been left in the dark about their future rights as residents in the other territory. The Irish backstop is a matter only few now dare to mention and bilateral trade negotiations have somehow fallen completely under the table. The promised vast amounts of trade deals the UK had intended to have negotiated by now, comes to a whopping number nine,  compared to the 40 trade deals with over 70 countries the UK is about to forego with the loss of its EU membership.

On 12 April, the UK was supposed to leave the EU, however we are now no closer to reaching an agreement than we were last week, or the week before, or a few months ago for that matter. Instead there has been another extension of Brexit day – a so called ‘flextension’ – to 31 October with the possibility of delaying the date even further. Will the Hallowe’en deadline bring a climactic end to the interminable horror of unending Brexit negotiations? Who can say?

The UK government should currently have one item on its negotiating agenda – to make a decision about whether, and how, it takes the UK out of the European Union or keeps it in. At the moment the Government is not making a clean fist of it.

Having had her Withdrawal agreement rejected three times, Mrs May is now seeking support from her Labour opponents to settle a deal which could be agreed by MPs in the House of Commons. Theresa May’s stance on this matter is quite clear – Jeremy Corbyn’s not so much. Over the past few weeks he has faced a personal dilemma between finding a way forward for the UK to proceed with leaving the EU while also balancing the pro-European views of his party. The rest of Parliament is equally torn between opposing Theresa May’s deal under all circumstances and aiming for a sensible, implementable exit agreement for the UK. In the midst of this torn Parliament Theresa May and Jeremy Corbyn are trying to find  common ground  from which  they will be able to generate majority support from MPs in the House of  Commons.

Will the six-month extension make any difference to the inability of Parliament to determine the look and shape of Brexit? The diversion between the two parties’ views on the optimal Brexit deal reduces the chances of an agreement being reached to an absurdly small margin. Labour’s aim is to retain Customs Union membership, the common external tariff and a close trade relationship with the EU. Theresa May on the other hand wants to allow the UK the right to establish bespoke trade agreements with other countries.

However, since 75 Tory MPs voted against Theresa May’s Withdrawal Agreement when she presented it the second time around, she is now dependent on Labour votes to support her deal. Ideally, she would probably like to get the deal approved before the European Parliamentary elections at the end of May. If no common ground is found by then, the Conservatives are expected to take a significant hit during the elections.

Urgent solution required

At the moment the UK essentially has three options: to agree on a deal before 31 October; leave without a deal on 31 October; or revoke the decision to leave the EU once and for all. While revoking sounds like an attractive alternative for ‘Bremainers’, dropping Brexit altogether almost three years after the EU Referendum would at the very least cause political turmoil, if not social uproar from within the section of the population who voted to leave and expected the Government to act accordingly. In such a case Parliament would have failed to respond to the ‘will of the people’ and would thereby have failed democracy. A second referendum would stand well if the only alternative option was a no-deal Brexit. And yet, we are not exactly sure what the alternatives are likely to be.

In the middle of the battle for agreeing on a deal in Parliament everyone seems to have forgotten about the rest of the economy – and the ones affected the most by any form of Brexit or otherwise, namely consumers and businesses.

Businesses relocating their headquarters from London to European cities has become such a common phenomenon these days, it has now received its own label: The ‘Leaving London movement’. With the additional relocation of talent from the UK to mainland Europe firms need to put plans in place to cope with the reduced availability of expertise in the UK labour market post-Brexit.

Uncertainty, pessimism and loss of confidence in the UK Parliament concisely sums up the sentiment of consumers and businesses in Britain. Consumer confidence has reached a five-year low this year, which is particularly bad news for business. Business investment in the UK has been declining for four consecutive quarters, a trend which is primarily driven by the uncertainty regarding the future of market access and supply chain management.

Businesses that are reliant upon non-UK supply chains have been stocking up on intermediate products to prepare for the UK leaving the EU under uncertain deal scenarios which might cause border control issues. This accumulation of stock has been costly for business and delaying Brexit till October 2019 is adding an additional burden to those costs. Business representatives are making their views clear: under no circumstance can there be another discussion in October about possibly delaying Brexit even further without clear guidance as to how the future relationship with the EU is envisaged. Uncertainty about what is going to happen to the UK on Hallowe’en this year is currently more frightening for businesses than any scenario of the UK leaving or not leaving the EU.

A disorderly Brexit is expected to lead to an overall industry decline – in some cases by almost half, which is forecasted for the automotive industry – and the main industries affected are those which are heavily reliant on trade with the EU. Currently 44% of UK exports and 53% of UK imports are traded with the EU. If no trade agreement is reached, the UK will have to find alternative buyers for its goods. This might prove rather difficult, since exporting road vehicles, -which makes up the highest number of UK exports to the EU, to Canada, Australia or any other country the UK intends to establish a trade agreement with – carries high logistical costs. As for imports, British consumers would have to do without European cars and manufactured items or pay a significantly higher price for them. And this goes without mentioning the increased cost of airline travel within Europe and restrictions of importing vital medication from the EU.

Loss of access to the European security cooperation system and Europol membership for crime and terrorism prevention are just some of the other items which somehow seem to have fallen off the Brexit agenda.

Although the two-year transition period is designed to clarify some of these unresolved issues, once a deal is agreed, there will be only minimal leeway available to make amends to the terms of the future UK-EU relationship.

It is almost certain that Theresa May would have to step down as prime minister before Brexit day on 31 October, if no alternative to her current deal proposal can be agreed in Parliament. Presenting her original deal to the Commons for a fourth time would simply be fatal and utterly pointless. Whoever is to succeed Theresa May if she chooses to resign, it is highly likely that the person will be a hard Brexiteer. In such a case chances could there be another‘;Brextension’ granted for Brexit day since a strongly anti-European Prime Minister would not agree to see through a compromised deal for leaving the EU.

The EU’s stance in such a scenario would probably be much firmer than it was when granting the current extension. The UK might find itself faced with only two options: either leave without a deal or revoke Article 50. However, the EU and the UK both have to accept one thing: the fact that neither of them is ready for a no-deal Brexit.

To recap: 746 days since triggering Article 50 and the UK has not yet left the EU. Whether and how Brexit occurs all boils down to how discussions are going to unfold over the next six months, or longer. Chances are, Brexit negotiations are going to continue for a considerable period – maybe even another 746 days.


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