“When the British people voted narrowly to leave the EU in 2016, they did not give the government a mandate to wreck our economic and political relationship with Europe”
- The Observer editorial 14th March 2021
Is Boris Johnson a lucky politician? Will every gutter he staggers into see him emerge wearing a new suit? Will everything thrown at him simply bounce off his Teflon coating? Almost everyday he escapes some scrape or scandal in the waiting. Recently he has slipped away from being dented by his suggestion of Covid-19 vaccination passports as a requirement for entering a pub. The next day he suggested the UK’s vaccination programme was a victory for “greed” and “capitalism”. Last week he dodged away from any blame from the respected Resolution Foundation finding that delaying the second lock down cost 27,000 lives. One dare not mention his 4 year affair with Jennifer Arcuri conducted while he was Mayor of London and his wife was undergoing cancer treatment. It seems that with a cheeky look to the side, a ruffling of the hair and the little boy lost look he overwhelmingly endears himself to voters. The so-called vaccination bounce sees the Tories well ahead in the polls. Will Labour ever recover? Will voters ever lose confidence in Johnson? Well, as Harold Wilson once said “a week can be a long time in politics”.
One area of scrutiny Johnson has evaded relates to his Brexit deal. “We hold all the cards”, “the easiest deal ever”, “frictionless trade would be maintained”, “the sunny uplands await”, “cake and eat it”, “take back control” etc etc. Have the media tested out these promises against the reality since 1st January? Have we seen fisher folk interviewed on the News at 10 lamenting their shellfish rotting on the quayside as they are unable to get them across the Channel quickly enough because of the increased export requirements? Interviews with exporters standing next to piles of new paperwork have been as rare as hen’s teeth. The potential of violence arising from the border between the UK mainland and Northern Ireland being moved into the Irish Sea hardly mentioned. Any criticism draws the response of “just teething problems” or the murky suggestion that criticism is a diversion from the real task of fighting the pandemic.
So, what evidence is available about how things are going since the new relationship with EU countries became a reality? How is performance working against the promises?
Both exports and imports to the 27 EU countries are down. This has the consequence of making the UK economy smaller and, if not arrested, will lead to company closures, job losses and a fall in tax take. Falling tax revenues impacts on public services and welfare support (including the state pensions of those older Brexit enthusiasts).
According to the Food and Drink Federation “exports fell significantly in January 2021, driven by a fall in sales to the EU of 75.5% compared to January 2020, a drop of nearly £0.75bn.” There was not a single EU country to which we did not export less in January compared to a year ago with Ireland seeing an 84.9% fall, France 67.5% and Germany 80.6%.
Cheese fell by 85.1%, beef 91.5% and whiskey 63.1%. Chocolate, animal feed, lamb and mutton, salmon, pork, fish and breakfast cereal were similarly affected.
The Federation claim that “much of this is likely due to new non-tariff barriers faced by UK exporters and the collapse of groupage movements which has shut out many SME exporters.”
The Horticultural Trades Association reports that garden retailers are facing “a perfect storm”. While demand for their products rise, they find their members are battling red tape relating to plant imports from the EU. A significant part of the challenge relates to how much of our plant imports are grown in Holland and Belgium.
Brexiteers will claim this is all a consequence of pre-Christmas stockpiling and the pandemic and trade levels will recover. We should be making, building, growing more of our own, they will shout without a thought to the costs of doing so let alone the little problem of that cost falling on UK consumers. And if it was so easy and attractive, why are we not doing it already?
Elsewhere a UK food company, whose products appear on the shelves of the UK’s largest supermarket, has decided to cease using British pork in its sausage products. This is because of the new complications around moving meat across borders. The company concerned sends 75 tonnes of organic meat annually to Germany but has been forced to stop its support for British farmers and switch to a Danish suppler.
The Federation of Small Businesses recently reported that many of its members had temporarily or permanently suspended trade with the EU. One member described the situation as a “nightmare” The blame is laid at the door of a massive increase in paperwork and costs being applied that previously did not exist. One way around the difficulties is for UK firms to establish warehouse capacity on the continent thus making distributing around Europe as easy as it was prior to December 31st. However, the set-up costs are simply beyond many small firms.
The British Chamber of Commerce has described “what looks like permanent deterioration in their (SMEs) competitive position due to higher administration, paperwork and shipping costs.”
The consumer agony columns of the Sunday papers are full of reports of what was once easy for UK consumers, to order from the Continent, now becoming very difficult, expensive, and in some cases, impossible. A click on Twitter will bring you an announcement from Royal Mail about the customs duty required on postings to an EU country.
Moving on to financial services, Brexit has been truly awful for the City of London with thousands of jobs and billions of Euros-worth of financial assets (£1.3 trillion) having left London for Frankfurt, Paris and other European destinations. Financial services lie outside the remit of the Withdrawal Agreement. To stop the haemorrhaging, Johnson needs to reach an agreement with the EU and a framework for the talks is now in place. To get an agreement Johnson needs to compromise. Compromise means accepting some degree of EU determined regulation. Johnson’s problem is that he has boxed himself into a corner with all the talk of the UK setting its own rules and not suffering any penalties for ignoring the EU rulebook – Johnson’s promise of the UK being able “to have its cake and eat it”. There is no way the EU will allow the UK access to its financial markets without some significant EU determined regulation. If Johnson accepts this, he risks going back on all his talk of “sovereignty” and “cake and eat it”. Unless he does, vast chunks of the UK’s financial services industry risks disappearing for ever over the Channel leading to job losses and a massive loss for Government income.
I guess the outcome could be Johnson does indeed compromise on his bottom lines but by then everybody will be so fed up with Brexit, he will get away with it and the usual Brexit big mouths in the media and Parliament will just stay quiet.
And then there is Northern Ireland! English Brexiteers may care little for what happens on the NI/Ireland border and where that border for trade purposes may actually be located. For the people of the island of Ireland this is a key issue. One wrong step and the Good Friday Agreement could be placed at risk with all the terrible consequences for violence and sectarian tensions that may bring.
Now you would be forgiven for thinking that Brexit is done. After all that was what the last General Election was all about. Indeed, when Johnson pulled a deal with the EU out of the hat just before Christmas it was sold to be public as an end to Brexit. The reality is that, when it came to financial services and the Irish border, the Withdrawal Agreement was simply an agreement to seek an agreement on these two contentious outstanding issues.
As far as NI is concerned, Johnson needs to find a way forward that avoids a hard border on the island of Ireland without moving it into the North Sea. As far as financial services are concerned, Johnson needs to find an agreement which protects the UK’s preeminent position in this market without coming under the control of laws set in Brussels.
On top of these challenges lies the simple reality that trade between the UK and its EU neighbours has reduced because of increased costs and red tape. Both are a consequence of designating ourselves as a “third country” and refusing, although we had the opportunity, to remain within the Single Market and/or Customs Union.
In addition, the Government has removed from its own citizens the automatic right to travel, work, study or retire in any of EU’s 27 countries. Those Brits living in Spain and Portugal etc can now only remain for 30 days in any 90-day period unless they obtain local residency rights which includes proof of having the previously unrequired comprehensive health insurance.
One can only smile at those Brits recently turned back from a Spanish airport after a flight from Manchester because they did not have the correct paperwork. This may have angered the Brexit ultra newspapers. However, Spain was only exercising the rights that the UK left the EU to gain so we could keep out Spaniards and other Europeans unless they had the necessary paperwork.
With regard to checking goods entering “sovereign” Britain, that was so important to “controlling our borders” the government has kicked down the road for several months the opening of port border checks because the infrastructure is not in place and the required customs officials not recruited. Smugglers of goods and people must be rubbing their hands with glee. How long before a consignment of dodgy meat is flown from the Far East to, say, Amsterdam and taken on to the UK and straight onto supermarket shelves unchecked? After all the Dutch will have no incentive or requirement to check the load as we no longer reside within the Customs Union.
What we are witnessing is a country committing a form of slow suicide. No country since the advent of widespread global trading has deliberately distanced itself from its nearest trading partners and negotiated poorer trading arrangements than existed previously.
Brexit is like a dripping tap that no washer can fix. The most recent drip of Brexit disaster comes in the form of shellfish farmers considering taking legal action against the government for not delivering what it promised. Just image what would happen if every company that has encountered extra costs, delays and red tapes as a result of Johnson’s Brexit deal on the back of numerous promises of days in the “sunny uplands” instead took such action?
Our affairs and prospects are being driven by that section of the electorate riven with xenophobia and nostalgic pipe dreams about days of Empire. We have a Government more than willing to play to these prejudices and bizarre wishful thinking.
We had a sharp reminder this week of what the reality of so-called “Global Britain” really means. When he introduced the Digital Services Tax, the Chancellor made a big play that he could not have done this as a member of the EU. Sadly for him (and us), the US President does not much like US owned companies such as Google, Facebook, Apple, etc having to pay more tax in the UK to rescue our economy at the expense of profits that would have landed in the US. So guess what? Those Yanks with whom we brag of a special relationship plan to apply punitive import duties on ceramics, pottery, clothing, etc coming from the UK. So “taking back control” is a two-way street – who knew? The outcome will almost certainly be our Chancellor backing down. After all, we cannot take on the US economy which is larger than the EU’s. Suddenly being go it alone “Global Britain” is not quite so attractive. Better, perhaps, to be within the warm embrace of the world’s biggest and most successful free trade area.
My forecast is that our economy will slowly weaken and weaken. Johnson will get around this with promises of jam tomorrow as long as we apply a bit of “Blitz spirit” and Brits behave in the mythical manner invented by Brexiteers and their supporters.
In an as yet undefined number of years’ time, when the older Brexit supporting Empire nostalgists have departed to that dreamland of UK world domination in the sky, the next generation of voters will start to ask why is it so difficult to do the simplest of trades with the countries nearest to us? Why don’t we enjoy the citizenship rights taken for granted by EU country citizens? Why are we constantly struggling to strike meaningful trade arrangements with countries half a globe away when we have a much more accessible market on our doorstep?
The Government of that time will then negotiate a new and meaningful arrangement with our neighbours. We will once again join the family of countries with whom we have most in common and be welcomed back warmly. By then the posh bookshops will be full of histories of Johnson, Gove and Farage and historians will be highlighting how they lacked vision and sold the UK down the river in exchange for short term populist glory.
Comments