For some time, it looked as though that Brexit fantasies would be crushed by Brexit realities. The discrepancy between what had been promised, and what is being delivered increasingly seems too stark to hold up in any court of public opinion. Most recently even Chancellor Rishi Sunak seemed to acknowledge a link between the UK’s low growth forecast and Brexit – saying claiming that it had always been clear ‘that a change in trading relationships with the EU would cause a hit to the UK economy,’ even though he immediately tried to play down that remark. Even very high-profile Brexit ultras like Ben Habib now acknowledge that actually existing Brexit is worse for the UK than remaining a member. As a result, it was not surprising to see efforts by the government to slowly push Brexit into the background. Most obviously, civil servants were instructed to stop referring to Brexit and regular listeners and viewers of BBC programmes will suspect that the national broadcaster may have followed a similar approach.

Yet, quite unexpectedly, things have changed with the Conservative Party’s spring conference, which provided various signs that Brexit was back on the table and may become the key issue around which the Tory Party will want to frame its next General Election strategy. Indeed, the Times reported that David Canzini, the prime minister's new deputy chief of staff, briefed No.10 staff on the top issues for the next General Election campaign. Brexit reportedly was listed at the very top, above the cost of living crisis, the NHS, crime, and migration.

Given how desperately the government has been looking for – and failing to find – any noteworthy Brexit dividends, it may seem astonishing at first glance that the government wants to hang its political survival on precisely this issue. (Equally astonishing is that the Telegraph does not seem to have gotten the memo, still urging Remainers to ‘move on’ ). Paradoxically, this strategic shift towards relaunching Brexit as the GE campaign focus shows just how badly Brexit 1.0 has failed. Rather than being able to move on from Brexit by declaring it well and truly done and delivered, the only hope the government seems to have, is to try and reignite the bitter Leave-Remain electoral battles of 2016 and 2019. Yet, that is not to say that Brexit 2.0 will be exactly the same project as Brexit 1.0. Not even the Johnson government can eternally get away with ignoring the reality of the Brexit it has orchestrated. Most importantly, 84% of Leavers consider that the government is handling the cost of living crisis badly. So, simply promising the same thing as last time round (including falling consumer prices, VAT etc) will hardly cut it. We can expect a variant of the original Brexit project to emerge over the next year.

Brexit 2.0: Reboot and new allies

Perhaps the most worrying development this week was that unlikely suspects came out in support of Brexit. Most importantly, Tony Danker General Director of the Confederation of British Industry (CBI) accused ministers of ‘failing to grasp the opportunities of Brexit.’ This is quite a remarkable stance, given that the CBI – alongside much of UK business – were opposed to Brexit. Of course, now that Brexit is a reality, it does make sense for businesses to try and lobby the government to make most of this situation. What is more worrying, though, is that Danker’s statements also hint at the CBI not just accepting Brexit as a reality we have to live with – which it is -, but also starting to buy into the Brexiters’ sovereignty rhetoric . Thus, Danker now admits “that the CBI had been wrong on part of its approach to Brexit [and that the CBI] had failed to grasp why sovereignty was so important.” Coming from a business association, putting sovereignty above economic pragmatism is a strong statement, especially given the increasingly overwhelming evidence of just how bad Brexit is for the UK economy.

Indeed, the impact on the UK economy is so strong, that it is increasingly easy to provide evidence for it – despite all the confounding factors that according to Rishi Sunak make it difficult to disentangle the impact of Brexit from other factors. Thus, A report quoted by the FT estimates Britain’s fall in goods exports at 14 per cent compares to a 8.2 per cent rise for rest of the world, making any suggestion that British figures can be explained away with a reference to Covid or other global factors highly unlikely. Similarly, the Office for Budget Responsibility states in a new report (p.62):

“Our forecast continues to assume that leaving the EU will result in the UK’s total imports and exports being 15 per cent lower than had the UK remained a Member State […]. This fall in the trade intensity of UK output is likely to reduce the level of potential productivity, though the size of this effect is uncertain; we assume productivity is ultimately 4 per cent lower after a 15-year period. None of the new free-trade agreements (FTAs) or other regulatory changes announced so far would be sufficient to have a material impact on our forecast and, as our forecast is conditioned on current Government policy (including trade agreements), this does not take account of any future FTAs that the UK might conclude, or other deregulatory measures it might enact.”

On the note of future FTAs, the government did have some good news to report last week, namely that a deal was reached with the US to end tariffs on steel and aluminium exports. Yet, the good news were more than off-set by the fact that the US-UK agreement comes six months after the EU reached a similar deal with the US. (In other words, nimble post-Brexit Global Britain could have achieved the same thing half a year earlier had it not left the bloc). Worse still, the US trade minister Katherine Tai dashed any hopes of a UK-US FTA saying that she did not want to ‘spend years and spend a lot of blood, sweat and tears working on something that isn't going to be relevant to the needs of our people and our economies.’

Similarly, now that business travels has resumed many British companies – especially SMEs – start to feel the full impact of Brexit, while further damage to UK supply chains is expected once the UK Government introduces the full border checks on imports from the EU – which it now transpires may be delayed a fourth time, extending the advantage EU exporters have over UK competitors in accessing each other’s markets beyond July 2022.

Despite the mounting evidence for Brexit damage on the UK economy, the CBI seems ready to accept the hard Brexit trade off that puts sovereignty above economic growth in exchange for a better relationship with the government (although, as Chris Grey notes, few Brexiters would admit that such a trade-off exists).

From a sovereignty perspective the trade issues we are seeing may not be an unwelcome phenomenon. The FT cites a ONS survey that shows “that more than half of UK businesses that had changed their supply chain had switched to more domestic sourcing since the end of the Brexit transition period in January 2021.” Brexiters, no doubt, will soon tell us that reducing trade and forcing UK companies to buy from other UK companies was always part of the plan. The fact is, however, that it was not – instead we were promised ‘frictionless trade’ – and UK exporters continue “to be slowly cut out of global supply chains,” which on aggregate will have a much larger impact on the UK economy than any increasing in intra-UK trade due to its more isolated position in the world trade system.

The other new ally the government seems to have found is the Australian British Chamber of Commerce, which published a report on the agreement in principle on an FTA between the two countries. The organisation considers that the FTA ‘could stimulate a post-pandemic economic recovery for both countries, might be weighed down by overly pessimistic views of its impact on the British industry.’ This seems like an optimistic assessment given that the UK government’s own impact assessment of the trade deal estimates the FTA will increase UK’s GDP by a mere 0.08%. Given the body’s warning against UK farmers’ holding other sectors ‘hostage’ over their concerns with the one-sided nature of the liberalisation of agricultural markets, we can guess that the report reflects particularly the Australian side, which is set to benefit disproportionately from the deal.

Be that as it may, Brexit seems to have gotten a new lease of life and even new supporters at the very moment where it seemed like its promises could no longer be protected from its realities and Brexiters wanted to stop talking about it. With Brexit 2.0 now having been launched, it is important to try and understand the shape it will be taking and how it compares to the failed Brexit 1.0 model.

The shape of lies to come

Lies will remain central to Brexit 2.0, but they may become slightly different lies compared to the ones we have gotten used to since 2016. The lies during the 2016 referendum campaign were about misrepresenting basic figures about the EU and the UK’s contribution to it (e.g. the £350m for the NHS claim) and about its future development (such as Turkey joining the EU). Post-Brexit Brexit lies, on the other hand, have become more about attributing positive developments and policy decisions to Brexit when they had nothing to do with it (e.g. Sunak’s lie that the VAT cut on solar panels was a benefit of Brexit), or blaming the EU for negative effects that are actually the result of the UK government’s choice in favour of a hard Brexit (e.g. most things related to the Northern Ireland Protocol). These sorts of lies will become more prominent now that Brexit will once more become an important part of the Tory’s electoral strategy. We can expect anything positive happening between now and the next GE to be claimed by Brexiters as a benefit of Brexit and anything that does not go well to be attributed to ‘EU punishment.’

Further hints at the shape of Brexit lies to come can be found in Tim Stanley’s column in the Telegraph this week.  It would of course be easy to simply dismiss the confused and largely incoherent column, but we have learned the hard way what damage – current and former – Telegraph journalists can do to the country. Therefore, it is worth delving into some of these arguments.

I agree with Stanley that widely shared and commented short video from this week’s NATO meeting that shows the UK PM standing on his own while others shake hands and discuss, hardly provides any useful insights into the post-Brexit UK’s standing in the world. However, it is equally absurd to claim that Johnson not being invited to the EU Council meeting that took place on the same day can be easily explained away with the snide remark “that Britain is no longer a member of the EU, but the Left has gone so postmodern lately, they probably wonder why Britain doesn’t just self-define as Belgium and turn up anyway.” After Brexit, the fact that the UK PM does not participate in an EU Council meeting is of course not unusual per se. What Stanley omits, however, is that given the security situation in Europe, Liz Truss was recently invited to an EU Council meeting, and that it was expected that Johnson would be invited this week. The fact that he was not is despite diplomatic language certainly not unrelated to Johnson’s comparison of Brexit to the Ukrainian’s armed resistance against a foreign aggressor. This is a good example of the sort of bad faith arguments we can expect more of now that Brexit will top the Tory Party’s list of campaign issues.

Stanley’s column also nicely summarises a persistent Brexiter confusion, namely that they cannot understand that criticising the imperialist tendencies among part of the Brexit movement is not incompatible with regretting the UK’s declining international influence now that it has left one of the world’s largest economic blocs. To Brexiters, the domination of the British Empire over its colonies (including through military means) and exercising international influence as a member of the EU are the same thing; except that in the latter case others have a say as well, which to Brexiters’ means the UK can only have ‘poodle status.’ This clearly illustrates the fact that Brexit 1.0 was based on a misunderstanding of the notion of pooled sovereignty in the 21st century. We can expect Brexit 2.0 to draw equally heavily on the false notion that only a country that ‘goes it alone’ can be considered sovereign.

Stanley argues that not only are Remainers wrong to criticise Empire nostalgia if they want the UK to have more international influence, but also are they wrong that Britain has lost influence. Stanley of course provides no evidence for this claim other than the ‘impressions’ he and fellow journalists at the Telegraph have of what they observe. In other words, whether or not the UK has lost influence becomes a question not of fact, but of opinion.  
Another striking example in that category came this week from the Express who asked its readers to tell them whether or not experts are right that Brexit is to blame for a 14% drop in exports. (The problem, of course, is not that the 14% figure cannot be questioned and subject to discussion. The problem is that whatever figure we want to defend needs to be based on rigorous scientific analysis not - possibly poorly informed - opinion). Putting opinion and factual truth on the same level is another post-truth Brexiter strategy that we will see more of now that Brexit 2.0 has been launched.

Stanley goes on to reject any claims that Brexit is to blame for the botched ‘response to Covid, shortages, price increases, and the Eurovision defeat,’ but of course he cannot offer any counter evidence, but has to resort to ridiculing Remainers like Alistair Campbell to make his point.

The most shocking passages of the column, however, are where Stanley clearly shows that he does not recognise the serious security dangers the close links between Tory politicians and rich Russians close to Putin constitute for the country and for Europe. To him, Putin’s influence over the EU referendum is ‘irrelevant’ and ‘boring.’ Rather than talking about the impact of the potentially corrupt links between UK politicians and rich Russians* close to Putin he would ‘like to forget about that referendum and focus on more pressing issues.’ For someone who worries about the UK’s sovereignty and writes for a paper that contributed considerably to portraying Labour as an unpatriotic threat to national security, it is astonishing that a foreign power’s influence over a decision determining our country’s futures for decades to come does not seem like an issue worth dwelling on.
Besides the obvious inconsistency of this position, the argument that Remainers should move on from ‘yesterday’s hurt’ and from ‘stuff that’s still grinding their gears six years later’ illustrates the most fundamental misunderstanding or dishonesty amongst Brexiters, namely the false idea that Brexit happened in 2016 and is now done, when in actual fact its devastating impact is in full swing. Brexit 2.0 may be seen as some sort of acknowledgement that Brexit is in fact not done. However, there is little evidence that Brexiters have learned the lessons from the botched Brexit 1.0 and accept that rather than an event, Brexit is a process that requires careful handling - Stanley’s column certainly does not provide any evidence for that.

Home-made tensions

The second consequence of the Brexit reboot is that maintaining the tensions with the EU alive will remain important for the Tory Party and will stand in the way of a more productive EU-UK relationship emerging. It will also make solving the really pressing issues - most importantly those surrounding the NIP - more difficult.

The past two weeks have seen an increased media coverage of the NIP, not only because of the approaching local elections in May, but also because of renewed pressure on the government to trigger Article 16 that would suspend parts of the protocol. This is a greatly concerning development given the geopolitical and European security situation. But it is a logical consequence of the Tories deciding against campaigning on reality and in favour of campaigning on tribalism. Due to Brexit 2.0, the us versus them thinking will remain key for electoral success, as will the ‘culture war,’ while economic realities and other pressing societal issues will be pushed into the background. Indeed, Brexit 2.0 can be expected to be characterised by an even more rigorous decoupling of reality from discourse and fantasy, simply because reality is not supporting the case the Tories will try and sell to the electorate.

Populist economic policy

CBI boss Tony Danker sees the main Brexit opportunity in the fact ‘that we actually now are sovereign about an economic strategy to grow faster than the rest of Europe.’ Is there any chance of Brexit 2.0 delivering on that opportunity?

Judging by what Johnson’s Brexit government has delivered so far, that seems highly unlikely. Rather, the third characteristic of Brexit 2.0 will more likely be a continuing chaotic economic policy that is driven by the will to maintain power, rather than by any coherent industrial strategy aimed at improving the countries economic fortunes.

What such a chaotic strategy looks like can be illustrated by the ongoing saga around the mass redundancies at P&O Ferries. Given the high salience of the issue, the government is keen on portraying itself as intervening on the side of UK workers. After all, Brexiters promised that exiting the EU would allow the UK to do just that. Yet, the reaction to P&O shows just how contradictory Brexiters’ approach to the UK’s post-Brexit economic policy is. While the Tory party refused to back a motion banning the ‘fire and rehire’ practice in the Commons last week, it engages in all sorts of mediatic actionist stunts – such as issuing deadlines over rehiring the sacked workers, detaining P&O’s ferries alleging safety concerns, as well as threatening to impose a minimum wage on the ferry industry. In other words, instead of solving the root cause of the problem across all industries with a law that increases worker rights, the government targets a specific company or sector when it seems to generate political benefits. That will help with claims that thanks to Brexit the government could help the P&O workers (which it could have done without Brexit of course) but will mask the fact that more fundamentally the government is unwilling to improve working conditions and workers rights in the UK.

That stance makes a lot of sense for the Tories of course, given that – as Chris Grey astutely observed in this weeks Brexit & Beyond blog – they are stuck in the situation where they promised one half of their Brexit-backing voters less labour protections, while they promised more protections to the other half. No serious, coherent economic strategy can come out of such a contradictory fantastical project as Brexit – which to some extent Kwasi Kwarteng may have admitted when ditching the industrial strategy for Britain last year.

In short, the UK’s post-Brexit economic policy will be mainly aimed at holding together the disparate coalition of libertarian rentiers and of disillusioned workers by opportunistically intervening in the economy to please one or the other depending on what is perceived the most acute electoral threat at any given moment. Needless to say, that such politically orientated economic policy making is hardly a recipe for successfully halting the unprecedented decline in living standards the UK is currently experiencing. While there may have been a glimmer of hope – albeit a very faint one – during the Tory congress last autumn that Johnson may actually be serious about the high wage, high skills, high productivity economic model he wanted to pursue, the relaunch of Brexit 2.0 will dash any such hopes, however faint they were. We are firmly in the territory of politically motivated shorttermism that aims at one thing only: Maintaining the Tories in government.

Further evidence that Brexit 2.0 is unlikely to bring the much needed change in the government’s haphazard approach to economic strategy was provided this week by the news that a 60% majority stake in National Grid has been sold to the Australian investment bank Macquarie. The sale is characteristic of Britain’s approach to public utilities, which for decades has put openness to foreign capital and the interests of shareholders above the interests of British workers and customers. Indeed, Macquarie has a poor track record when it comes to managing public utilities in the interest of consumers rather than shareholders as its decade-long ownership of Thames Water shows. Yet, the government chooses not to do anything, despite its belated activism in the P&O case. The parallels with Dubai-owned P&O Ferries, are obvious and confirm a decades long trend (noted by Chris Grey) to adopt a hands-off approach to the selling off of British companies to - all too often predatory - foreign investors regardless of the consequences for British workers and customers. It seems obvious that that approach will not change and rather than putting a stop to the root cause of the problem, the UK government will intervene opportunistically when political capital can be gained from public outrage like in the P&O case.

In short, the Tory Party’s decision to campaign once again on Brexit means that we will continue to have to deal with all the dishonesty and lies and that relationships with our closest partners most likely will remain tense. In economic policy terms, Brexit 2.0 will certainly continue to be based on an opportunistic but basically restrictive approach towards the movement of people across borders, it will continue to subordinate the free movement of goods and services to ‘sovereignty’ concerns, but it will remain hands-off concerning the free movement of capital across borders. Beyond that, it currently looks unlikely that any coherent economic strategy will come out of Brexit 2.0. Instead, the decision will condemn Tories to even more forcefully separating discourse from substance, which is most likely to lead to a sort of ‘political nihilism,’ as Peter Foster puts it. It is to be hoped that the opposition parties will find the right answer to pull the country out of the Brexit 2.0 swamp.

 

 

 

*The most recent revelations by Byline Times show that Rishi Sunak has various direct and indirect business links to Russian oligarchs which potentially could create conflicts of interests.