Cliff Taylor: don’t bank on another extension – a no-deal Brexit is a real risk

The talks between the Conservatives and Labour have collapsed, and the focus at Westminster remains inward

The whole focus in London is back inwards to the bear pit of British politics rather than outwards to what the EU might actually agree to, or even what might be in the UK’s best long-term interest. Photograph: Getty Images

The whole focus in London is back inwards to the bear pit of British politics rather than outwards to what the EU might actually agree to, or even what might be in the UK’s best long-term interest. Photograph: Getty Images

 

It hasn’t gone away, you know. Brexit has been on a bit of a media break over the last month or two since EU leaders agreed to extend the UK’s departure until October 30th, while leaving the option open of an earlier date. But it’s about to come roaring back into the headlines. And while not much may seem to have happened over the past few weeks, this itself tells a story.

UK politics simply can’t cope with Brexit, and against this backdrop another extension of the article 50 deadline in the autumn, if this is needed, must be very much in question. Why bother when things in London just keep going around and around the same circle? For Ireland, unfortunately, this means the threat of a no-deal Brexit continues to linger even if the Government, in pre-election mode, is choosing to keep on spending and hoping for the best.

French president Emmanuel Macron took flak in April after taking a tough line on extending the article 50 exit process. On the day he was seen to lose the battle.

Yet some seasoned political observers believe Macron knew what he was doing, and is now much more likely to carry the argument if we are in the same situation in October. This can’t be taken for granted – Germany and the Netherlands remain cautious on a no-deal – but come October Macron may well be able to say “ I told you so”.

So far events in London are proving him correct. Very little of substance has happened to plot a successful exit since the April council meeting. The debate in London is still about the seemingly impossible job of getting everyone in the House of Commons to agree a route forward.

The whole focus is back inwards to the bear pit of British politics rather than outwards to what the EU might actually agree to, or even what might be in the UK’s best long-term interest.

The talks between the Conservatives and Labour have collapsed, and there is now the possibility of MPs being asked to take part in a series of indicative votes on a way forward before a vote on the withdrawal bill itself in early June. But this is all surrounded by the usual uncertainty, chaos and confusion.

Old myths

And the same old myths are being peddled – that the UK can maintain frictionless trade while still leaving the EU trading bloc, or that it can have some kind of a customs union plan which still allows it a say in how the EU rules are set and the ability to set its own trade policy.

Meanwhile the fallacy that checks can be avoided at or near the Irish Border by some magical use of technology and advanced processes continues to feature. These days, as we know, fake news and lies can linger and take hold.

After the conclusion of the EU summit, council president Donald Tusk – a supporter of a long extension and as close to an ally as Theresa May has around the table – advised the UK “please do not waste this time”.

And if you thought the Conservative/Labour talks did just that, it will be nothing compared to the Conservative leadership contest.

The debate at the April EU council was won by those who argued against a “no-deal” exit, warning that the EU would be blamed and that huge economic and political damage would ensue.

But consider the possible context in October after Nigel Farage and his cronies take a lot of seats in the European Parliament election, and the other leaders likely face a new UK prime minister who could well be Boris Johnson.

With no – feasible – agreed way forward from London, this pushes the likely outcomes to two extremes – a no-deal crash-out or some kind of final political reckoning in London, perhaps via a general election or some kind of second referendum, perhaps the only events which would give a clear case for yet another extension.

The UK could, of course, revoke article 50 unilaterally, but it’s hard to see who would press that button.

Real conundrum

For Ireland this presents a real conundrum for Minister for Finance Paschal Donohoe, who will publish the first key pre-budget document, the Summer Economic Statement, next month.

The gap between the outlook for 2020 with an agreed Brexit and one with a no-deal crash-out is enormous. It could be the difference between growth of, say 3 per cent to 3.5 per cent next year and not much growth at all, with a real hit to specific sectors of the economy. That is night and day in terms of economic planning.

In all likelihood the growth rate will slow over the next few years anyway as the bounce back from the economic collapse ends and international growth remains at best subdued. Yet while a gradual slowing of growth presents a challenge in terms of controlling government spending, a sudden no-deal exit promises a nasty short-term hit – and a long-term impact which is hard to calculate.

Much of our current debate – on spending projects, investment, pay and even tax – ignores the impending likely slowdown in growth. And it certainly pays no heed to the risk of a no-deal Brexit, which would deliver a damaging jolt to growth, confidence and, thus, tax revenues.

It would be no harm if Donohoe spelt out clearly the implications of this, and the possible need for a “Plan B” in his summer statement.

We need to realise that this is a live possibility – and that come October we just can’t assume that the UK will get the nod for yet another delay in its exit date.

BREXIT: The Facts

Read them here
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