Post-Brexit challenges for U.K.
The financial markets had a rude awakening on Prime Minister Boris Johnson’s first day back at the office. Instead of using his new parliamentary majority to push for an ambitious trading relationship with Europe post-Brexit, Johnson doubled down on his election pledge to rush ahead and complete trade talks next year, suggesting there will be either a bare-bones deal or no deal at all. Either way, that would be bad for the U.K. economy.
The Brexit deal struck by Johnson in October allows for a one- or two-year extension for more considered trade negotiations; Johnson is waiving that option. Instead, his Withdrawal Agreement Bill to be presented to Parliament on Friday will contain a new provision making it illegal for Britain to request an extension to the current transition period, which runs until the end of 2020.
It may seem odd that a government with an 80-seat majority would tie its own hands when setting out on the country’s most important negotiations in a generation. But Johnson’s move speaks to two domestic audiences: the Leave voters who gave him his majority, and the Brexit ultras in his parliamentary party who still carry weight. Fortunately, he has left himself more wriggle room than might be obvious at first glance.
In order to win over Brexiters, and neutralize Nigel Farage’s Brexit Party, Johnson pledged not to extend that initial transition period. He has also indicated that he won’t agree to European Union demands on “level playing field” provisions, which would keep Britain aligned with the bloc on areas such as state aid and social and environmental regulations. He’s sending this electoral base a signal that he’s as good as his word.
To the public, his move says “I know why I’m here.” If his election proved anything, it was that people are tired of Brexit and are less bothered by the terms of exit than how quickly it happens. Johnson is well aware that trust in politicians is extremely low, and that his own reputation for honesty is poor. He doesn’t want to be seen to renege on something that won him the election.
His move also signals to the class of new MPs, especially those from Leave-voting northern England, that they must deliver on Brexit if they’re to hold those seats in future. Ultimately, that will mean finding ways to make the lives of these largely blue-collar voters visibly better, something that Brexit will make much harder. But many British voters appear deaf to the threat of economic damage from quitting the EU: the political imperative is just to get it done.
Sticking to a hard Brexit line also speaks to the parliamentary Tory party’s euroskeptic wing. Johnson’s majority is mighty, but the European Research Group of hard-core Brexiter lawmakers — the ones largely responsible for ending his predecessor Theresa May’s time in office Brexit — hasn’t gone away. While Johnson has a “stonking mandate,” as he calls it, a war of attrition around the negotiating table in Brussels could wear on that support.
The New Statesman’s Stephen Bush notes that the former Labour prime minister Tony Blair was dealt a major defeat by his own party at the height of his powers in 1997, and so was Margaret Thatcher in 1986, when 72 MPs voted against her plans to change restrictions on Sunday shop openings. Of course, neither of these votes was on such an historic issue. But Bush’s point — that it only takes 40 angry Brexiter lawmakers to overturn Johnson’s majority — is worth noting.
None of this will be of particular comfort to business, which has promised to be more vocal during the trade talks. Johnson’s stance means that a smaller deal, on a narrower range of trade areas, is in play than company bosses would like. It also makes a damaging no-deal conclusion to the talks more likely — hence the pound’s plunge on Tuesday.
And there’s unlikely to be any certainty until well into 2020. Neither the EU nor the U.K. have set out clear negotiating objectives nor agreed the sequencing of the talks. A shortened time-frame means plenty of thorny issues — from services to data — probably won’t be tackled. Nor is it clear that negotiators in Brussels will work in quite the same way as during the withdrawal talks. Michel Barnier is still running the discussions, but this is a new European Commission with major reforms and budget talks of its own to worry about. And trade talks offer more opportunity for differences to emerge between EU member states.
There are two slim silver linings. First, the worst-case scenario isn’t the economically cataclysmic “No Deal” we worried about for much of 2019. The terms of the divorce are already agreed, EU citizens rights secured and the Irish border question resolved (in a fashion). There have been plenty of preparations by governments and business for extra customs and regulatory checks.
What is more likely is what one might call a “low-deal Brexit” — or even a “slow-deal Brexit” since the first trade deal may agree a few basic areas and leave the door open to forging closer ties on others later.
The second reason not to panic is that Brexit deadlines tend to be delayed. Whatever blocks against extending the transition are passed in Parliament, nobody really thinks that the EU and U.K. governments, if they chose, couldn’t find a way to give themselves more time. It’s been done before.