Still all to play for

We have become used to late nights in Brussels over the years. Between 2010 and 2015 they were a permanent feature of the calendar as EU leaders wrestled with the problems posed by the Greek debt crisis. In recent months we have had to adjust our sleeping patterns once more to accommodate the unfolding drama of the Brexit crisis, with the UK forced to throw itself on the mercy of EU27 leaders to avert the prospect of departing the EU without a deal. As an exercise in irony, the position in which the UK government now finds itself is hard to beat. Remember how Brexit was all about “taking back control?” Remember how “they need us more than we need them?“ And what ever happened to “Brexit means Brexit?” Or “no deal is better than a bad deal?”

For the last six years I have been pointing out that the arguments put forward by Brexit proponents are inherently contradictory. As we have got closer to the departure date the risks to the economy resulting from a no-deal Brexit have become ever more clear, and reasonable politicians realise that they should not be prepared to take risks with the well-being of those who they represent. It has taken a long time for many senior politicians to see the light – too long in my view – but at least they swerved back onto the road at the last minute rather than continue to drive headlong over the cliff. The charlatans in the House of Commons (and beyond) who claim that Brexit is a cause worth crashing the economy for should be called out for what they are: Liars and fantasists who clearly do not understand that in an interconnected world, everything depends on everything else. 

Political and economic independence is a myth – and always has been. If we use trade openness as a proxy for the degree of interconnectedness with the rest of the world, and measure it as the share of exports plus imports relative to GDP, the UK ranks 52nd on a list of 174 countries (just behind France) with a share of 62.5% – higher than the G7 average of 56.2%. The most closed economy, and therefore the one with the least to lose if trade with the rest of the world were to be disrupted, is Sudan with a share of 21.5%. It’s not exactly something to aspire to. The US and China score 26.6% and 37.8% respectively. Something else that struck me this week when looking at the latest set of trade data is that the share of UK merchandise exports going to the EU has risen steadily over the past three years. After bottoming out at 46.6% in 2015 it has since started rising again, reaching 49.1% last year (you can retrieve the data here). What was that about they need us … ?

Looking forward, the UK now has a six month grace period to figure out what it wants to do. The lunatic fringe in the Conservative Party will doubtless continue to rant and rave that any extension is a betrayal of democracy and that the will of the people is being disrespected. But they have nobody to blame but themselves for passing up the opportunity to leave the EU. Theresa May’s government gave them a Withdrawal Agreement, which was admittedly far from perfect but it was always going to be the best deal they would ever get. And they blew it – in much the same way as they blew their opportunity to rid themselves of Theresa May as party leader last December. The time to have a confidence vote was after the Withdrawal Agreement was heavily rejected in January, not before the vote took place. The predictable snarling from Tory backbenches about how they plan to unseat the prime minister reminds me of the kids at school who sat at the back of the classroom and talked tough but ran away at the first sign of trouble. They are, quite simply, tactically inept – and we pay them to run the country (though “run” is just an “i” away from “ruin”).

As it happens, I suspect that the EU also made a blunder yesterday by only offering the UK a 6-month extension rather than a year. EU Council President Tusk’s suggestion of a one-year “flextension” was backed by most European leaders other than French President Macron. Whilst I have sympathy with Macron’s view that the UK could cause more trouble if it remains in the EU and acts as an obstacle to further EU progress, there is a strong sense that he was playing to a domestic audience (though they were more likely to be demonstrating against him than listening to him). The French twice blocked the UK’s entry into what was then the EEC in the 1960s, partly because the government at the time did not believe the UK shared the ideals of the six founder members. What better way to stick two fingers up at Perfidious Albion by demonstrating that de Gaulle was right? But it may have been a tactical error.

The polling evidence clearly indicates that those who believe it was a mistake for the UK to vote to leave the EU now hold a significant lead over those who believe it was the right choice. Moreover, the Poll of Polls collated by What UK Thinks, which surveys how people would vote if they were to be presented with the choice in a second referendum, indicates that Remain holds a substantial lead over the Leavers (chart). Although we have learned to be wary of the predictive power of the polls, it is notable that the 8-point lead in favour of Remain is wider than at any time prior to the 2016 referendum. Simply put, the tide appears to be running against Brexit and I suspect that the shambolic nature of the negotiations and dysfunctional nature of UK politics has played a role in shifting people’s views. If the EU is serious about trying to persuade the UK to remain, a longer extension which allows time to see whether this trend will run further, or indeed reverse, would have been a sensible option.

Whilst much remains to be decided, both regarding Brexit and in the wider political sphere, one thing is certain: There will be more uncertainty.