Sean Rickard - Independent Economic Analysis

Theresa May yet again, avoided defeat in Parliament with a compromise.   At the eleventh hour our vacuous Brexit Secretary, David Davis confirmed it would be down to the Commons Speaker to decide whether any motion put forward by the Government on Brexit was amendable – meaning MPs would potentially have the power to dictate the Government’s policy if negotiations break down.   The compromise amounts to progress of a sort – we have come a long way from the government’s original position that Parliament should have no vote at all – but Theresa May has proved untrustworthy so a meaningful vote is not certain.   That said, her policy of continually kicking the can down the road with a vague compromise accompanied by disingenuous or downright dishonest utterances is approaching its denouement.  


Two years after the referendum, a disturbing reality is closing in.   The Government, Parliament and the country remain riven by Brexit.   Under Mrs May’s failing leadership the cabinet cannot agree on its negotiating stance despite mounting evidence of the high costs of Brexit.   She promised a White Paper on the issue and articulation of a means of avoiding her backstop commitment on the NI border before the end of June.   It’s anybody’s guess as to when either of these might appear.   Not surprisingly, the EU is losing patience; little if any progress is expected at the forthcoming summit and the date for an agreement – allowing the UK to remain as a non-voting member of the EU for two years or more – has slipped to December or even January, just weeks ahead of Britain’s scheduled Brexit date.   The government’s shambolic behaviour is increasing the likelihood that Brexit will end up as one of the greatest acts of self-harm ever inflicted by a developed nation, not only to its economy but also to its reputation for responsible governance.


If the Government and Parliament are failing in their fiduciary duties to whom could the country turn for leadership?   My money is on business.   Business leaders who are becoming alarmed that the UK may suffer a hard Brexit by default, have started to voice their concerns.   Tom Williams, CEO of Airbus’s commercial aircraft division has cautioned that ‘the severe negative consequences’ of Brexit may force it to leave Britain.   Airbus, which employs 15,000 people across 25 sites in the UK says it could lose up to €1bn a week in sales, if the UK quits the EU without an agreement for frictionless trade.   Jürgen Maier, Siemens CEO expressed frustration with the lack of clarity for companies like his who are now having to consider where to invest for the future.   The UK head of BMW said the carmaker would have to make contingency plans within months if post-Brexit plans are not clear and John Neill, CEO of Unipart said the implications for the economy of ‘no deal’ could result in many jobs disappearing into Europe.   Together BMW and Unipart account for some 40,000 jobs in the UK.   Leigh Pomlett, president of the Freight Transport Association, said he feared gridlock on roads and shortages in shops if frictionless trade is not maintained between the UK and EU.   Richard Christian, head of policy at the Port of Dover, pointing out that with some 12,000 truck movements per day through Dover there was no infrastructure at Dover to carry out the import checks required in the event of no deal.  


Speaking on Radio 4’s Today programme Paul Dreschler, the retiring President of the CBI, outlined the threat to manufacturing of tariffs and non-tariff costs outside the customs union, particularly for sectors who currently enjoy the benefits of pan-European supply chains; the more so as there is ‘zero evidence’ that trade deals with non-EU countries would provide offsetting benefits for manufacturing.   He further observed that UK companies are shifting investments of tens of millions of pounds offshore as a result of Brexit while the government’s fixation with Brexit was stopping it from addressing pressing economic priorities, including infrastructure improvements and the lack of appropriately skilled workers.    


Despite lacking the knowledge or facts possessed by the business leaders that have spoken out, the zealots recklessly dismiss their warnings as ‘project fear’.   The disgraceful performance of Peter Bone on Newsnight was typical.   In a fluster of assertions and half-truths, he dismissed Airbus’s concerns as political.   Leaving aside the hypocrisy – the Leave campaign’s leading economist admitted that Brexit would ‘mostly eliminate manufacturing’ – would any sane person choose to trust the wishful thinking of the Brexit ideologues rather than the business executives who spend their days creating the country’s wealth and trading with the EU?


If the Cabinet is not prepared to take seriously the warnings of business leaders one can only hope that when the long-delayed trade and customs bill comes to the House of Commons in mid-July, MPs – armed with a parliamentary report published earlier this year that came to the same conclusion – will assert themselves.   An amendment to the trade bill backed by a number of Conservative MPs and in line with Labour party policy calls for the UK to stay in a customs union looks likely to prevail.   But MPs need to go further, as membership of the customs union does not avoid the costs of non-tariff barriers.   This blog has previously urged consideration of the Jersey Option ie, the UK remains in the customs union and also the single market for goods.   Indeed, according to James Blitz, writing in the FT, this option will be at the centre of discussions when the cabinet meets at Chequers in July in yet another attempt to put together a negotiating position.   Parliament and/or the Governments adoption of the Jersey Option may still fall foul of EU objections – it might be viewed as cherry picking – but I think such a move would garner support in the EU and it would I think mean that ultimately the UK will not leave the EU.  

V O I C I N G  B U S I N E S S  C O N C E R N S  –  A T  L A S T

25th June 2018


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