There’s going to be a Brexit crunch or crisis of some sort, and maybe that’s for the best?

Sod all this cheery coming together lark. I admire Ian Dunt for trying it, but ultimately I do not think it is going to work, not least – as Richard Elwes elegantly points out – so many Remain people rightly feel what happened prior to the referendum was a swindle. Brexit is ultimately taking your pick among a bunch of unpalatable options – either a sort of Soft Brexit (might not wreck the economy, but has basically no political gain) or Hard Brexit (the opposite). There is some middle ground where the actual decisions are fudged through transitional deals (that may anyway last years), or through years of slog to the promised land. Fun, but try running those past Farage or IDS.

All of that is ultimately the heart of Britain’s current Brexit pickle. Theresa May cannot actually really lay out what sort of Brexit she wants as any variant of it has a load of opponents, even among Brexiteers. And all of that three months ahead of when Article 50 is meant to be triggered.

As I see it there is not a sodding hope that May is going to put forward anything that is actually achievable in the Article 50 process in the plan the Tories have promised to Keir Starmer. May has to essentially propose some sort of have-your-cake-and-eat-it Brexit plan as to put forward anything else is going to prompt howls of anguish that she may not be able to control (go too hard and some pragmatists in her party and UK business scream, or go too soft and Davis or Fox resign and the hard right of the Tories are furious).

So off May goes to Brussels aiming for something that anyone with any vague understanding of how the governments of the rest of the EU (and indeed the EU institutions) are thinking know will go down like a cup of cold sick. May – lacking connections and rapport, and having failed to actually work out if the Article 50 notification can unilaterally be withdrawn – ends up facing a major crisis pretty quickly. How that ultimately plays out is anyone’s guess – it might need a new election (and some sort of party realignment) while the Article 50 clock is ticking, or it might suddenly prompt more open fears from among UK business than so far expressed about what their prospects are in the circumstance that Britain is not ultimately going to be able to do much to help them.

Trying to avert that crunch is a waste of time. There is no way between now and the end of March to possibly work out all of the multitude of Brexit complexities that ought to have been answered before the referendum, to work out how Brexit is going to actually practically and indelibly alter the lives of every person resident in the UK, and to find workable ways to soften the multitude of problems that leaving the EU will cause. It’s taken the UK 6 years to work out how to build a third runway at Heathrow, and now it’s embarking on Brexit having spent 6 of the 9 months since the referendum coming up with precisely nothing of any value. A bit of reconciliation between Remain people and some liberal leavers is not going to solve this now.

So let’s have the crisis. Let’s be done with the notion that all is fine in UK politics and that things can carry on as normal. And let’s hope the fallout is more political than it is economic, as the latter hurts everyday lives more and is probably harder to put right. But if May triggers Article 50 in March there is going to be a crisis, and maybe it’s better we have it and be done with it. Then things can start to recover.

(A few caveats – this ignores the Supreme Court case that may knock the government’s timetable off track, and assumes Labour is incapable of kicking up a fuss in the House of Commons. It also assumes that the EU side holds and that France does not elect Le Pen. Also note I have written a load of other things about varieties of Brexit, and am intentionally short in how I cover the varieties of Brexit here)

13 thoughts on “There’s going to be a Brexit crunch or crisis of some sort, and maybe that’s for the best?

  1. I have better scenarios playing out in mind, but here is one of the worst: How would the EU protect itself from a poor but nuclear-armed England-Wales that is dominated by authoritarian parties and allied with a geopolitical villain of your choice?

  2. A crisis is not something you can switch on or off on demand. It tends to start with a major disagreement and then gradually spins out of control. A political crisis can become an economic crisis and even a military crisis even if the original protagonists never wanted or envisaged that. The internal dynamics of competing interests just take over.

    The major problem with the UK debate is that it is taking place largely in a vacuum: there is very little awareness of How the EU 27 are preparing to respond. Ambassador Ivan Rogers walked when he realised Tory leaders didn’t want to know and couldn’t cope with the reality of what is about to hit them.

    I have tried to envisage how such a crisis could unfold in A Brexit doomsday scenario. It does not make for comfortable reading from a UK perspective…

  3. I see the odds for the start of Brexit late this year or 2018 have dropped, do they know more than the gov.

  4. I hope you’re right, Jon, because that sort of crisis would be good. It could lead to a more honest discussion. But I fear that other outcomes are almost as likely. Ones where the most cynical of politics escapes scrutiny yet again.
    For example, the one where the UK government presents a ‘reasonable’ list of objectives, knowing well that it cannot be accepted by the EU.
    There will be awkward handling of this by an EU side which has little access to UK media and even less understanding of it. Perfectly justifiable but poorly explained requests to meet financial obligations running into billions of Euro, combined with harsh choices on citizens rights will galvanise the debate into ‘Us vs Them’.
    In this situation, any voice of reason will be silenced. There will be a crisis, but not the one which leads to rational discussion.
    Such a scenario could play out in several ways. To survive, the UK government will focus on managing the blame game. In this, they will be aided by a largely compliant media.
    A rather nasty ‘negotiation’ period will end with a bitter taste, but everyone will have an incentive to agree a transitional period to soften the blow a bit.
    Brexit may appear by that stage to be a sort of damp squib. Any economic damage will not be fully apparent but can be blamed on the ‘Europeans’. Negative consequences can be managed by the Bank of England and by continuing the retreat from austerity.
    The consequences of Brexit will not be clear, but the UK government will be able to claim victory by having taken back ‘control’ of borders and laws. None of its members will be around to account for the disaster which slow-drip isolation and decline will bring.
    What could disrupt this ? At one point, I thought that the Irish border would be the stumbling-block, but the Irish government has little option but to allow itself to be bullied into agreeing to anything to keep the peace. Much more of a problem would be if it becomes clear that Scotland might actually vote for independence…

  5. Boris “ffs” Johnson was right in alluding to the Titanic. There is going to be one almighty collision with the iceberg of political reality. Political because it comes down to power and with the country split, in a schism, forces outside outside the Britain(English) control are inevitably going to crush the current impasse. It will not be pretty.

  6. I agree with this post. Quite a bit has been written on Brexit over the past year and much is coming up since June that should have been debated properly long before June.

    Hopefully the crunch won’t be too severe, but I have a suspicion that Andrew Ellis has it right when he terms it the calm before the storm. Right now many Brexit supporting papers are trumpeting over the treasury and morgan stanley admitting they got it wrong on the immediate aftermath of Brexit, but I don’t think that necessarily means the opposite is true and that Britain is about to go surging forward. The treasury and morgan stanley noted that there were factors they hadn’t taken into account when theorizing the effects of a Brexit vote including:

    – the BoE acting swiftly (which in part was due to the BoE’s fears of the effects, so they failed to predict that the BoE would attempt to forestall the effects they were predicting…I think we can give them that)

    – that consumers are adopting a wait and see approach and living more in the moment than looking towards the future; hence they spend more because they are thinking of the here and now rather than the next two years (this factor actually suggests that any crunch has merely been forestalled because the crunch will occur when spending dries up after consumers begin to experience negative effects on their savings, wages and purchasing power…so instead of curtailing spending now in anticipation of hard times, consumers seem to be going along merrily until the hard times hit and what then?)

    – that half of the country voted for Brexit (and would have to under any scenario where Brexit won the referendum); this is related to the point above about the consumers in that Brexit supporters would be buoyed and confident and would not reduce spending because they see Brexit as a positive development.

    – the uncertainty that arose around the referendum was more political uncertainty that had little real impact (as yet) on the economy

    – the weaker pound would attract a bit more tourists and/or tourist spending as well as some more inward investment in property etc. This would be minor but combined with the other effects would help to stave off a recession.

    The predicted movement of the pound was spot on though and this will likely have effects in the future with a bit of lag time. So imports and domestic goods with significant import components (including fuel) will become more expensive. As property would have become cheaper as well from a drop in housing prices this might not immediately translate into less spending as now people can spend less on rent/mortgage/fully purchasing a place to live even if they spend more on food and clothes.

    However May’s pronouncements and the expectations she needs to fulfil seem to point to a hard Brexit as the customs union option by itself is unpalatable; the EEA option has a number of hurdles and as it includes free movement is dead as an option anyway and the Association Agreement option with a Deep and Comprehensive Free Trade Agreement as Andrew Duff has been proposing is also unlikely given the desire to jettison the ECJ and automatic adoption of the acquis entirely (and the DCFTA basically requires the Ukraine, Georgia and Moldova to adhere to 90% of the EU’s acquis, including how it is interpreted by the ECJ but without any input; the dispute resolution mechanism also includes a tribunal consisting of an ECJ judge, a British judge and neutral third party I believe). The Swiss bilaterals are basically a precursor to the Association Agreement and DCFTA but spread out across a number of different (but linked) agreements and including the free movement of labour; in any case the EU is not keen to replicate the experience.

    Ultimately I can see the following scenario playing out:

    1. Theresa May outlines her plans for Brexit (which has a bit of have-your-cake-and-eat-it element to it)

    2. The Supreme Court rules that Parliament needs to approve the triggering of Article 50; resulting in a short act to the same effect. Article 50 is then triggered by March 31, 2017.

    3. The EEA challenge in court ends up with a win for the government’s position of EEA membership being linked to EU membership and being automatically lost with the EU membership

    4. Negotiations begin and some technical aspects go well. There is a dispute over the Commission’s estimated “divorce bill” and perhaps a solution is worked out in terms of reducing the payment and spreading it out.

    5. Negotiations go nowhere as to the future trading relationship as the EU can only offer what’s on the menu while the UK is asking for combos that don’t exist. This is where a number of businesses become nervous and start doing contingency planning if they haven’t done so already.

    6. Negotiations wrap up without any agreement on the trading relationship but with agreement on granting continued residence rights to UK citizens in EU member states and EU citizens in the UK. At this point a number of businesses begin or accelerate the process of protecting themselves by either relocating or establishing branches in the EU ahead of the Brexit deadline. It’s at this point (in 2018 probably) that some jobs begin to be lost directly due to Brexit. At this point the pound has probably slid even further during the whole time.

    7. The UK begins to work on hiring the necessary personnel and putting in place the necessary facilities to deal with WTO-only type trade with EU member states and with all countries that the EU has FTAs with.

    8. Brexit officially occurs and we see disruptions in trade and services. Richard North (a leaver who long planned out how the UK should exit the EU via the EEA and then changing the entire system in Europe) discusses this in a couple posts: http://www.eureferendum.com/blogview.aspx?blogno=86335 and http://eureferendum.com/blogview.aspx?blogno=86162 . It’s probably only when those disruptions happen and traffic and goods are backed up out of Folkestone and probably entirely out of Kent and along motorways into the surrounding counties and other day to day stuff that nobody really notices but which is essential for the smooth flow of the trade and services they rely on becomes “gummed up” do we see the onset of panic by consumers (including a number who voted for Leave). At that point the ill effects predicted by the Treasury, Morgan Stanley and others will probably come to pass and jobs will be lost (either temporarily or permanently) as businesses are disrupted due to the disruption in trade. The disruption in trade also leads to shortages of some goods (temporarily), which in some cases will impact on inflation as those remaining available goods will be priced higher where this is possible. Even short-term job losses or having workers sent on indefinite leave without pay is likely to cause a contraction as this directly impacts consumers as the consumers are those workers who now have a lot of free time but no longer have an income for at least a few weeks if not months. Some job losses will be permanent as some foreign businesses assess whether remaining in the UK under these WTO-only conditions really suits there purposes. Perhaps then Nissan might have a change of heart given the changed environment impacting the assurances previously given to them. Perhaps then some financial firms will move jobs to mainland Europe and some may scale back operations and operate more out of New York.

    9. Eventually the disruptions are sorted out, but probably not before they cause a crunch. Some effects will likely last months or years.

  7. Having watched the Supreme Court hearing and seen the tone of questioning, I suspect the court will find that the UK Parliament needs to pass a law to amend / undo the 1972 European Communities Act prior to Article 50 notification being given. That might not delay the timetable, however. I suspect that if the government presented a bill to that effect at very short notice and demanded that MPs approve it then a majority of MPs would vote for it. No idea what the court will say re. Northern Ireland, though.

  8. David Cameron should have stayed to sort out the mess he created just to try to hold the Tory party together.For this I blame him. I might even call him a political coward for failing to do so. There can be no remotely achievable policy about leaving that isn’t going to upset and possibly split the Tory party, and it is this which is causing the delay of Mrs May’s announcement.
    A friend who posts “isn’t it great we’re leaving” links can’t even say what he wants out of leaving. Personally, I think we’ll be lucky if it is merely a car crash, and not a motorway pile-up.
    I enjoy your posts, even when I don’t agree with all of it. It is good to be made to think one’s position out. Perhaps we might encourage Mrs May to subscribe?

  9. I agree with you, Jon, that a crisis is looming. I think we’re actually heading full-on for a series of crises, not just a political one. While we wait for the Supreme Court hearing on whether the PM has prerogative or not, this may also include the insoluble problem of the devolved governments of Northern Ireland and Scotland. Are we really prepared to tear up the Good Friday Agreement? We are then up for two or more cases, including whether A50 is revocable and also whether we need to trigger A 127 (membership of the Single Market) separately from A50. And there may well be more….

    But maybe Philip Collins from the Times is right and that we can get some visible reform in the EU which will mean we could then have a proper second referendum next time around…http://www.thetimes.co.uk/edition/comment/eu-leaders-could-engineer-a-second-referendum-pj5mx9x6h

  10. This is a period of calm before the storm; your analysis seems spot on to me. The more resolute the 27 are in the face of desperate brexiteer cake-having-and-eating, the more likely a UK political crisis becomes. With luck this won’t have too serious an economic impact (though it can hardly be expected to have no impact). Like you, I don’t see how it’s possible for the circle to be squared; a large minority of Remainers will never be reconciled to the Leave vote, many more (including a lot of “soft” Leave voters) won’t accept a hard brexit that leaves them materially worse off, and deprives them of the perceived benefits of EU membership. Hard brexiteers won’t accept the 4 pillars of the EU, and less extreme Leavers are unlikely to accept a deal which the EU is able to offer without undermining its very raison d’être.

    The best convinced Remainers can hope for is that a UK political realignment leads to a general acceptance that a brexit2 referendum is required, but that seems increasingly unlikely. The next option is to fight for the closest possible association with the EU. Meanwhile, I’ll be redoubling my efforts to support #indyref2 in Scotland, and full EU membership for Scotland as an independent state; if the EU has any sense it will do everything possible to support this. All things considered, the EU is probably better off without the English cuckoo in the nest.

    Damage limitation should be the order of the day; try to ensure stability, offer the English the best deal consistent with the over-arching principles and survival of the European project, but make sure that the brexit disease doesn’t prove terminal. Le Pen is already back tracking, but Brussels has to move quickly to make meaningful reform a priority, even including if necessary allowing the PIGS to leave the Euro, which they should never have been allowed to join in the first place.

    In the end, getting rid of half hearted member may prove to have been the best thing to happen to the EU for a generation, but it will take a steady nerve for EU leaders to pull it off.

  11. Part of me wishes us “remainers” just stood back and said: “Ok, the people have spoken. We’ll just keep quiet and let you the leavers organise that leaving.Let the rest of us know when you’ve done.”
    And when they have done, the remainers will not be happy and a large number of leavers will not be happy. Then what?
    The whole brexit “thing” has been built on lies and misrepresenting and misunderstanding the eu. Not just during the campaign but for years before. Recent events with judges and civil servants have shown a willful disregard and/or lack of knowledge of how democracy works in UK We need a massive overhaul of our democractic systems and if crisis is needed to bring that about then so be it.

  12. Exactly right, in my view, Jon, and thank you for writing this. Some journalists holding hands with Daniel Hannan will neither help nor hinder anyone. What matters is what our government and the other 27 governments do. All we can do is pay close attention, forgoing wishful thinking, to how the crisis unfolds and react to any opportunities that might arise to influence events.

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