It’s pretty seldom I agree with Larry Elliott in The Guardian, but the headline of his recent piece – “Britons seem relatively relaxed in the face of Brexit apocalypse” – struck me as about right. Because there is not going to be a Brexit apocalypse. Or at least not in the way that pretty much all of the UK commentariat thinks anyway. Elliot reckons that banks in the City of London think the chance of a No Deal Brexit are about 10% – I would tend to agree with that too. A couple of good Twitter threads by @Sime0nStylites and Brigid Fowler are worth reading for some more background.

So why is there not going to be a No Deal?

There are two possible avenues to a No Deal Brexit – either a breakdown in negotiations in Brussels, or a political crisis of some sort in the UK. And in both cases there are ways out of the impasse before the UK goes over the veritable cliff.

Let’s look at each scenario separately.

The first route is the negotiation breakdown route to No Deal. The agreed EU position (essentially a Canada-style trade deal for the UK, NI backstop, and Customs Border in the Irish Sea) and the UK position (the Chequers plan) are still a long way apart. No one really even believes the UK’s customs plan is even workable. So there is the danger that – come autumn – it is clear there is no way to come to agree a Withdrawal Agreement. Negotiations break down in acrimony, and No Deal comes into view.

Then what? Surely that would lead to economic and/or political panic in the UK, with politicians outside the Tory Party demanding that May returns to the negotiation table. Or, on the economic side, a run on the pound. In such circumstances either the UK side or the EU side would come to the view that extending the Article 50 period would be the only option to make sure the UK does not crash out (remember the EU side also wants to avoid No Deal Brexit as well). No Deal scenario averted.

I also do not buy the idea that all these headaches will crop up at the last minute. The EU side knows it needs a good 6 months, or 4 months at a push, for the Withdrawal Agreement to be ratified. The EU is not going to let this all boil down to a last minute cliffhanger of a summit in March 2019 to hammer out a deal. If there is no way to get to a deal among the current players then that will become clear this autumn, meaning there will still be time to step back from the No Deal cliff edge.

The second route towards, but not actually *to*, No Deal is caused by UK political dysfunction. May’s Chequers Deal pleases no-one, and it would need to be softened further to manage to make it acceptable to the EU side. Rees-Mogg has written to Tory associations rubbishing the deal, and Boris Johnson is supposed to be plotting a move against Theresa May during Party Conference season this autumn. Both Rees-Mogg and Johnson are happy about the idea of No Deal, but there the clump of Tories who haven’t entirely lost their heads (Soubry, Grieve etc.) and the DUP too that reject it; a No Deal Brexit results in a hard border in Ireland that the DUP expressly rejects.

So here too I cannot see how this ends up with a No Deal. Even if Johnson managed to oust May, he then makes other problems for himself, namely denying the government a majority in the House of Commons. Here too No Deal is not going to be the outcome, because Labour would side with (ex-)Tory Rebels to make sure the UK did not end up with No Deal, and instead seek to down the government and force a new General Election. Faced with political upheaval in the UK, what is the EU side going to do? Push the UK off the cliff? No, because No Deal also hurts the EU, and especially Ireland. Even if Rees-Mogg and Johnson keep their plotting on hold until late autumn there is then still another way – any time up until March 2019 Article 50 can be extended so as to prevent a No Deal Brexit.

Now there is a big question mark hovering over all of this – it assumes that there are enough people on both sides to realise a No Deal Brexit is foolish for everyone, and to step back from the brink. I am pretty damned sure there are enough people on the EU side that see this, and I even think there are enough on the UK side as well – Labour understands it, the SNP and Lib Dems too, as do a couple of dozen Tories and, for other reasons, the DUP.

When No Deal really looms into view, minds will be focused, and the UK will not go there. That is going to happen sometime this autumn – hold on for a bumpy ride in a meantime.

10 Comments

  1. i admire your optimism and pragmatic belief that cool logic, rational self-interest and plain common sense will ultimately prevail come the brexit due date. sadly, these traits were firmly booted out of the window like a puppy in flames back in june 2016 and i fear that the continuing downward spiral of the UK body politic will find its natural apogee in a no-deal brexit.
    of course the EU is keenly interested in avoiiding a no-deal scenario; however, it has long ago set out its stall what it can and cannot offer (viz barnier’s step-chart diagram) and as such it is down to the UK to decide how it wishes to accommodate itself with the EU subject to that body’s legal parameters. if the UK cannot proceed on a decision, let alone engage with a process, then there is ultimately nothing the EU can do.
    as such, any belief that a no-deal can be avoided rests entirely with the UK’s political establishment, but the dysfunction is now so considerable and extensive that everyone is looking to the EU to throw them a lifeline, but this will not happen, of course, as per my above. i’m always bemused by the final default opinion that “parliament will not allow a no-deal” and would somehow ride to the rescue of the whole thing, a bit like the pre-referendum shibboleth that the german car makers would not allow a bad deal to go through – parliament is as dysfunctional as its constituent parties.
    as every bookie will tell you, the longer you go without a result in a timed game, the more likely it is you will have no result – with over two years since the referendum and 18 months since mrs may submitted the A50 notice, anyone who believes that things will somehow go alright on the night is clinging to straws here and in spite of everything i said above, so am i . . .

  2. Richard

    I remain highly sceptical of arguments explaining why there cannot be a no-deal Brexit that omit to mention any mechanism that will avert it. Frankly, these arguments seem essentially to rest on such an outcome being unthinkable for reasons. All of which is well and good. But they don’t do anything to explain how the Commission’s plan for an NI only backstop can be sensibly reconciled with May’s Chequers plan. Until I can see some form of path that would allow that issue to be addressed, or at least fudged, it looks to me as if no deal is the default path.

  3. So far, the UK government and much of the Labour leadership have shown no signs of intelligent life; I’m not sure that the cliff edge will focus what passes for their minds, sadly.

  4. Daniel Wraith

    Hasn’t the possibility of their being a no-deal [skeleton] deal being roundly dismissed. Surely it would constitute cherry picking at its finest. If the EU isn’t prepared to compromise on the indivisibilty of its 4 freedoms in October, surely it will be no more flexible when it comes to minimising disruption on d-day.

    Enjoyiable post!

  5. Travis Zly

    The EU27 and the European Commission intend to crush Britain. This is not a game. Past experience shows that Germany, the European Central Bank and the EU Commission were prepared to totally gut the Irish economy in 2010 to save the German banks. The ECB forced the RoI taxpayers to make good on every single bad loan on the books of Anglo Irish Bank, Allied Irish Bank and Irish Nationwide, so that German bondholders would get their money back in full. All other bondholders had to take huge losses. The Irish economy tanked and wretchedness was inflicted on the whole society.

    Ditto Greece. Once the European financial crisis hit, Merkel and Sarkozy got Greek taxpayers to guarantee every single loan on the books of Greek banks. This was to ensure French and German banks got back from Greek taxpayers every cent of their investments in the collapsed Greek housing bubble. Greece is still reeling from this economic terrorism by France and Germany eight years on.

    These criminal acts by Merkel, Sarkozy, the EU Commission and the ECB directly led to the collapse of Cyprus’s two largest banks and the bankruptcy of the island of Cyprus, which had invested heavily in Greek government debt. Cypriot taxpayers, like the Greek and Irish taxpayers, will be paying off bank losses for the next 30 years.

    The European Commission acts on behalf of French, German and Luxembourg banks and the wider Eurozone banking system. They have already shown that they had no second thoughts about crushing the economies of Ireland, Greece and Cyprus, so that investors from Western Europe would suffer no losses. In the same way, Britain will be mercilessly ground into capitulation so that it does not destabilise the Euro. This is not a game.

    • Gracchus Babeuf

      And what is wrong is wanting to protect your investments? Should Merkel have ‘gifted’ millions to Greece and others out of the kindness of her heart? Arrant nonsense, of course, and you know it. Britain would have done the same to protect her interests and has done so in the past in the days of Empire. The European Commission is not out to ‘crush’ anyone, but rules are rules and if you don’t play by the rules then you face the consequences.

  6. Johan Sundell

    Extension needs support from all EU countries, after seeing the Canada deal almost fail I would not trust an extension

  7. Huw Sayer

    Interesting – I hope you are right but I fear you are too sanguine – the words “surely there must be” (along with your big assumption at the end) are doing a lot of heavy lifting. I agree the EU doesn’t want no WA deal but they aren’t fully in control of the situation. Meanwhile, the faith-based brexit ultras (left and right) will do anything to deliver Brexit on 29 March – extension is anathema to them.

    Plus – extension achieves nothing – unless there is a radical change in parliament – and it is not certain that the electorate, in the midst of a crisis that the UK press will pin on the EU, will elect a moderate government of any stripe. Brexit is now the baked-in default – a lot must happen all at once and in a short space of time to stop it or even slow it’s imminent arrival.

    @HuwSayer

  8. Bryan Charles

    Sensible reasoned post.

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