We are in a weird position at the moment. The EU Commission is saying they're "available over the coming weeks should the United Kingdom wish to hold talks" and the British government says it's "ready and willing" - yet nothing is happening because of each side's so-called red line around the Irish backstop. I don't suppose this sort of impasse is unique in international relations when countries can't agree something, but the difference in the present case is the Article 50 clock, which continues to run down towards the extended deadline.
The days are going to be crossed off until the pressure to do a deal becomes unbearable for one side or the other. You don't need to be a genius to see which side that is going to be. This morning the BBC are reporting the Food & Drink Federation pleading for competition law to be suspended to help keep the "food supply chain going" after Brexit. I ask you, which PM is going to inflict food shortages on us? And expect to win an election shortly afterwards?
We are at the poker table behind a pair of 2s brassily trying to convince the EU that we've got three of a kind. The EU actually have a Royal Flush, the top hand in poker, and are sitting there with quiet confidence. The pot has grown frighteningly big. The government is playing the equivalent of Texas hold 'em with entire industries, the nation's food supply and the lives and livelihoods of millions of people - even the unity of the entire kingdom.
We will blink when the cries from industry and the currency markets get louder and begin to drown out the combined efforts of the ERG, The Telegraph, The Sun and The Mail. With Dominic Cummings behind it all, this may take some time and be quite a hair raising ride. It will probably do irreparable damage to our reputation for sanity as well as our economy. But the bottom line is that we need a trade deal with the EU. If not immediately after Brexit, certainly in the next few years if not months. Even if it takes twenty years, sooner or later a future British government will go cap in hand to Brussels and do the rational thing.
Leo Varadkar, the Irish PM, speaking in Belfast made this very point:
“If there is no deal, then at a certain point, we will have to begin negotiations again and the first items on the agenda will be citizens rights, the financial settlement and the solution to the Irish border.”
To maintain the fiction that we can manage on WTO terms you would have to believe Britain can continue forever trading with our biggest partner on the worst possible terms. This might suit the Tory party hardliners, who are relaxed about inflicting a lot of harm on those least able to withstand it, but a new government will come along and have to confront the same three issues.
Some, including the CBI recently, said the EU have already put in place mitigating policies to avoid damage to trade, but called on them to do much more. The media took it to mean we are better prepared than the EU which was a bit of a giggle. What the CBI wants is for the EU to help us out of the mess of our own making.
Robert Peston in a Twitter thread said the EU, "regards the idea being floated by many Brexiter MPs and the CBI that there will be mini deals before 31st October to lessen the shock of no deal as wholly laughable. 'The CBI stuff last week was desperate nonsense' said one EU source. 'It is not the EU's job to mitigate Brexit's impact on UK. No deal means no deal - not mini deals' ."
Brussels believes that it has completed almost all necessary no-deal planning, except it may try to organise improved communication between relevant national agencies and the EU Commission. It regards the idea being floated by many Brexiter MPs and the CBI that there will be...— Robert Peston (@Peston) August 5, 2019
"If Boris Johnson's and Dominic Cummings's cunning plan is to go hell for leather for no deal in the expectation that the EU will panic at the last and offer them a seamless, frictionless path to a new trade and security deal, sans backstop and with the divorce payment made conditional, they should be prepared to have their bluff called. So here is the question that will determine the fate of this nation: which of the EU on the one hand and Johnson on the other has the greater reputation for conducting reverse ferrets? And if you think neither will show flexibility, you should be bracing for the pound to fall to parity with the euro very soon, and to properly assess how a no deal Brexit will affect you, and what you can do to soften the impact".
Larry Summers, the former US Treasury Secretary, in comments made on Radio 4's Today programme the other day, was confident that we would never get a good trade deal from the USA.
David Davis and Johnson always used to say it was only by threatening and being prepared to leave on October 31st that we'll get a good deal from the EU. But Mr Summers pointed out that the British government is now engaged in a policy which is the total reverse of that.
'In the same way, establishing absolutely that, as a matter of sacred principle, you're leaving Europe has to be the worst way to give you leverage with any new potential partners.'
He said it is 'close to inconceivable' that the UK would be able to increase its trade with the US enough to make up for lost trade with the EU.
The USA know that come November 1st we will have irrevocably thrown away the best possible deal that we have had for over 40 years with Europe and we will be in desperate straits, looking to quickly conclude a deal, 'do or die', to borrow a phrase, and with zero leverage. Our Foreign Secretary, the always glistening Dominic Raab, has been in Canada rattling his trade deal begging bowl before traveling to the US and Mexico to do the same.
He talks of "grasping the enormous opportunities of our new found freedoms" while at home his own government is running around offering financial and other support to farmers, businesses both small and large in order to save them from closure. It doesn't sound quite right to me and no doubt the Canadians, Americans and Mexicans will have noticed we are looking a little anxious and ripe for the plucking.
In Scotland, Lord Ashcroft has carried out polling post Johnson's elevation to the premiership and following his recent visit there - when he was booed. He found growing support for independence with a small majority now (51%) in favour of it, which will boost the SNP. But asking how people would vote in another referendum was even more interesting. It shows a 5% increase in the position of remain since 2016. Now 67% would vote to remain compared to 62% in 2016.
Again, this is in line with most UK wide polling. Replicated throughout the four nations this would show a 53% majority for staying in the EU
Finally, to add to Johnson's troubles north of the border, a group has submitted a legal challenge in Scotland to prevent parliament being prorogued as he has threatened. It is the same legal team that took the UK government to the European Court and won a ruling that Article 50 could be unilaterally revoked so it's not inconceivable they will win again.
Sterling update
After a brief pause yesterday, sterling is tracking south again this morning. It's at
