There is not that much big Brexit-related news to report this past week. Actually, there has been quite a bit of good news (relatively speaking) on the Brexit front. Since my last post, there has been some progress on data protection, and on the Northern Ireland Protocol (NIP). Moreover, the UK and the EU have found an agreement on the long-awaited Memorandum of Understanding (MoU) on financial services (although observers were quick to point out that all the MoU does is establish another ‘toothless talking shop’ that was as useful as a ‘chocolate teapot’).

But there were also the by now habitual stories of concerns over the impact of trade barriers on UK companies (especially smaller ones), of relocation of businesses from the UK to the EU, of the impact of Brexit on British citizens’ everyday life (especially those living in the EU who face various issues from driving licences to their right to remain in the EU), and of its impact on EU citizens living in the UK (including children). While these may all seem like relatively minor inconveniences, they are important to keep track of, because seemingly innocuous stories oftentimes hide a great deal of personal suffering for the people concerned.

At another level, these stories are important because they may provide us with clues about where the country is headed politically speaking. Brexit so far has largely been about opinions and expectations, not reality. Now that we have entered the realm of reality, the divide between ‘Leavers’ and ‘Remainers’ may slowly be replaced by a divide between actual ‘winners’ and ‘losers’ of Brexit. While ‘Leavers’ coincides with ‘winners’ in terms of the referendum outcome, in terms of the Brexit reality – due to their predominant socio-economic characteristics – this may not turn out to be true. Similarly, while Remainers are often considered (sore) losers of the referendum, the economic realities underlying the Brexit vote imply that Remainers are less likely than Leavers to bear the brunt of the ‘real existing Brexit.’ This implies important shifts in the political cleavages in British politics, which both major parties may be struggling to react to. Time to take a closer look at the emerging post-Brexit politics.

From Remainers and Leavers to Winners and Losers – New cleavages in British politics

Populist phenomena – which in my view Brexit is an example of – can be explained in two ways: culturally and economically.

The Leave and Remain labels, as they are currently used, refer to an important extent to cultural differences in values and norms. Indeed, the leave – remain divide reflects a new political cleavage that has opened in many countries around the world and goes beyond the traditional left-right divide. It is described by some political scientists as a cultural chasm between an urban, cosmopolitan elite who celebrate values of liberalism, multiculturalism, and pluralism and the rural and industrial ‘left-behinds’ who defend more traditional – even nationalist and nativist – values. Leave voters fit the latter description quite well. Indeed, analyses of the referendum result show that the two main factors explaining the Brexit vote is age and education: the older and the lower your educational achievement, the more likely you are to have voted leave. These characteristics also tend to correlate with defending more nationalist, traditionalist values, as opposed to liberal cosmopolitan ones. Here, opposition to immigration – not just for its economic effects – but also for its impact on national culture is a key factor to vote for Brexit.

However, Brexit was not just about culture and values, but also about very real economic issues that people are facing. Economic factors are the second most important factors explaining the leave vote. Unemployment, stagnating real wages, and austerity are important – some hotly debated – socio-economic causes for voting for Brexit. Thus, an influential study found that individuals and areas affected by the austerity measures introduced by the Coalition government after 2010, were more likely to support UKIP and to vote leave than individuals and areas not affected by austerity. More generally, people with low skill levels in low-paid jobs or out of work, were more likely to vote for Brexit than people with in well-paid high-skilled jobs.

The reason for this relation between socio-economic status and preferences for and against Brexit, is that the integration of markets has undoubtably put pressure on the former groups’ living standards, while the latter in generally rather benefited from increased mobility and more economic freedom. Indeed, there is a lot of academic evidence that liberalisation of trade, capital, and migration flows puts pressure on low-skilled workers’ living standards (e.g. for the UK and for the US). In Europe, the EU has been the main driver of market integration in all three areas (capital, labour, trade) – indeed it has been described as a ‘liberalisation machine.’ A particular important issue here is that the EU’s ‘freedom of establishment’ right and the related right to provide services across borders. This has allowed companies to pay EU migrants working in the UK wages based on the conditions of employment prevailing in their home country, which explains some of the economic grievances of leave voters. It cannot be denied that the EU does bear some responsibility for these grievances by exacerbating deindustrialisation and pressures on wages.

Yet, liberalisation has not got to be a disaster, as it can be selective, managed, and accompanied by necessary social measures to soften the impact of liberalisation on low skilled workers. In the EU such accompanying social measure often have not kept pace with liberalisation. However, we should not forget that part of the reason for the lagging of social policies behind liberalisation, is precisely because successive UK governments have pushed back against the EU’s social agenda, e.g. opting out of the Maastricht Treaty’s ‘social chapter’ when it was introduced in 1992. Similarly, the domestic social policies of successive UK governments did nothing to protect domestic workers from the impact of liberalisation, but rather tried to undercut EU labour and social standards. Therefore, it was UK governments which translated the international pressures into policies that ultimately transformed the UK economy into a low skill, low productivity economy. Other countries inside the EU – facing the very same pressure – chose to invest in skills instead, leading to higher productive that kept their workers internationally competitive, and wages and living standards up. More generally, like I have argued in some of my academic work, Anglo-Saxon countries tend to ‘manufacture discontent’ by not protecting their low-skilled workers from increased competition in global markets.

Given the interplay between international- and national policies, it seems unlikely that Brexit per se will improve the economic condition of low skilled workers. It is unlikely that – especially conservative – UK governments will fundamentally change their social policies to protect workers from downward pressures on wages.  Similarly, like I wrote last week, on the capital front ‘global Britain’ will not mean lower levels of capital mobility – including the buying up of British firms by foreign investors and subsequent restructurings. Indeed, making up for losing access to the EU Single Market may very well increase globalisation pressures especially if the UK decides to follow the ‘Singapore on Thames’ post-Brexit model. This all suggests that the more culturally dominated remain v. leave divide will revert back to an (economic) winner v. loser divide that reflects underlying economic causes of political discontent.

The cultural values underlying the remain v. leave divide overlap to a considerable extent with the economic ‘winner’ v. ‘loser’ of globalisation divide, as the culturally liberal, cosmopolitan urban elite also tends to have higher levels of educational and better paid jobs than culturally more conservative and lower skilled workers outside post-industrial urban growth areas. Yet, the two dimensions are analytically distinct, and this has very important political implications. Indeed, dealing with these two aspects of popular discontent – cultural and economic – arguably requires different political strategies – and the two major UK parties may not have found the right strategies for the post-Brexit politics yet.

Dealing with cultural and economic cleavages: The emerging political strategies

So far, the Tory party’s strategy under Johnson’s leadership has primarily focused on the cultural divide. Brexit certainly has provided leave voters with some satisfaction in this respect. The ‘two-finger salute from the working class’ to the ‘metropolitan middle class’ always has been one of the goals of the protest vote which Brexit arguably was. Indeed, UKIP and Brexit supporters often report general dissatisfaction with political elites, rather than leaving the EU, as main motivation for their vote. Similarly, seeing tens of thousands foreign-born workers leave the UK, is precisely what many leave voters wanted and will be pleased to see happening. As I wrote before, so far, the Johnson government has managed to ride this wave by keeping resentments against liberal urban elites and the EU alive. From this perspective, the abrasive political style the Johnson government and his ‘Brexit minster’ Lord Frost have adopted makes perfect political sense. Nationalist grand standing about various Brexit related issues – and indeed not so Brexit-related ones – allows the government to continue blaming the EU for anything that is not going well in this country, catering thus to the frustrations about ‘wanting our country’ back and such like. However, this nationalist strategy will run its course for two reasons.

Firstly, the government will have to resign itself to the fact that it needs to start building a more constructive relationship with the EU to tackle the serious issues that need addressing. There are signs that this has already started happening this week, with the UK government’s rhetoric becoming more conciliatory over key issues like the Northern Ireland Protocol (NIP), the financial service agreement, and the Covid19 vaccine row. On all three issues, the UK government has substituted negotiating behind closed doors for public grandstanding. While this will turn what Chris Grey calls the ERG Brexit ultras against the government, it is a necessary shift in the government’s approach to make post-Brexit relationships with the EU work.

Secondly, Brexit was a battle against windmills. The windmill was defeated. But soon people will realise that the windmill was not the problem. Or at least it was only partly to blame for their problems. When that happens, people will start asking the government to actually address the economic grievances that made them vote for Brexit and for Johnson in the 2019 General Election. What substantive policies can the government offer to address those issues?

Due to the pandemic, the chancellor Rishi Sunak, has so far shown a – for a conservative – rather uncharacteristic tendency towards anti-cyclical public spending. Public spending is one way of keeping the leave-voting part of the electorate happy after Brexit. Yet, senior conservatives are already voicing concerns about current levels of public spending, which suggests that once the pandemic is over, a conservative chancellor will come under pressure to return to a more traditional conservative policy of balancing the books. Of course, the Johnson government is not a usual conservative government, but has a distinct populist streak, which may mean it is less likely to adopt an austerity policy like PM Cameron and his chancellor George Osborne did. A return of austerity without the EU to blame for people’s grievances could mean a loss in political support in key electoral battlegrounds like the ‘red wall’ constituencies, but it is unlikely future conservative governments will be able to keep public spending at the level needed to compensate the ‘losers of globalisation.’

Beyond public spending, the Johnson government’s economic policies may contain some solutions for the economic grievances felt by leave voting constituencies. Thus, the government’s ‘levelling up’ agenda that aims at shifting some of the economic activity from London and the South East to other parts of the country, makes a great deal of sense. However, so far this agenda has been mainly focussed on environmentally disastrous big infrastructure projects like HS2 and moving government and civil service departments from London to other parts of the country. It is very doubtful that such government-focused moves alone will lead to the industrial transformation needed to create a genuinely more decentralised and equal UK economy. The latter goal seems particularly compromised by the recent decision by business secretary Kwasi Kwarteng to axe the government’s plan for an industrial policy that could have contributed to achieving that goal.

Therefore, once the effect of the nationalist anti-EU rhetoric wears off and people start asking for real change, the conservative party may be exposed economically speaking and lack realistic and working economic policies to address people’s actual grievances. The conservatives seem to be aware of that at one level, which would explain the government’s focus on nurturing the cultural divide. But this may just delay the necessary step of developing an effective economic policy response to the underlying economic divide.

What does labour’s strategy look like? Here, it is becoming increasingly obvious that Labour continues struggling to find its place in the Brexit reality. Indeed, as long as the focus remains on the cultural divide, labour will be struggling to gain the upper hand in elector contests against the Tory’s outside the large urban areas. This was very clearly illustrated this week by the row over the display of the Union Jack. Labour seemed at a loss to formulate any convincing response to the conservatives’ strategy of casting doubt on labour’s patriotic credentials. The FT cites a labour frontbencher as saying that the conservatives “want to maintain the Brexit divide which has worked for them.” In the absence of being able to portray itself as the more patriotic of the two major parties, Labour will be struggling to counter the conservatives at the level of the cultural divide and win back the support of ‘red wall’ voters and other traditionally labour-voting constituencies. So, labour has a strong interest in shifting the attention from politicising the cultural divide towards the economic one. If it manages to do so, then the conservatives relatively limited economic responses may give labour a chance to win back some of the support it has lost to Johnson’s conservatives in the 2019 General Election.

A first test of this hypothesis will come in about a month time with the Hartlepool by-election. Labour is defending a narrow lead of around 3000 votes with a candidate who was pro-remain, running in one of the strongest Leave-voting constituencies in the country. Ahead of that vote, labour leader Sir Keir Starmer has indeed sought to move beyond the leave-remain divide by explicitly stating that there was no case for re-joining the EU. With this stance Starmer has disappoint many Remainers (and Rejoiners) by reneging his previous support for a second referendum and earned him a lot of criticism. Yet, based on the above analyse, Starmer’s strategy makes good sense. The sooner the voters will care more about the economic issues underlying the Brexit vote than about the cultural values of national sovereignty, the sooner labour will be able to shift the public debate onto economic policy issues where it stands a much better chance of competing with the conservatives than at the cultural level.

Regardless of where one’s party loyalties lie, it is to be hoped that such a shift from the cultural to the economic divide will indeed take place. To start healing the deep divisions in British society that were revealed and reinforced by Brexit, real solutions for people’s real problems are needed, rather than patriotic and nationalist rhetoric to further stir up popular discontent.