Brexit is a divisive issue. We all acknowledge that, but just how divisive it is will start to become apparent next year. This is not only a leave/remain split either, although that will still be the great chasm that has opened up in British society. No, the next fissures will be between and among the various sectors of the economy as trade talks get under way.
At the outset, the Brexiteers expected the unity of EU27 to crack immediately. This is why ministers, including prime ministers went around various European capitals with the equivalent of jemmies and wedges, using threats and sweeteners to create division. It didn't succeed as we know. The EU Commission deserves credit for keeping a remarkable cohesion between the widely different interests of member states. But they only had three issues to deal with, the money, citizens rights and the Irish border. The next phase will be much harder.
But if Brexiteers think the problems will all transfer to the EU side, they are going to be sadly mistaken.
To get a glimpse of the future, this article on Bloomberg is a good place to start. It concerns the City of London financial industry which is now showing signs itself of splitting over Brexit. Trade talks are about compromising if they're about anything at all. You want to maximise access to somebody's market for your strongest sectors while minimising their access to protect your weakest ones.
But within each sector there will be differences of opinion as Bloomberg point out:
"Banks, insurers and asset managers have spent billions preparing for their departure from the European Union and have moved as much as 1 trillion pounds ($1.3 trillion) in assets overseas since the Brexit referendum in 2016. The threat of a disorderly departure from the bloc encouraged the U.K. finance industry to speak largely with one voice to try to avoid — or at least prepare for — that cataclysmic outcome.
"But now the no-deal Brexit threat has abated there are signs that this unity is cracking. Some in the City would like Britain to take advantage of the split and forge its own regulatory path; others want it to hew closer to the EU to make the transition as smooth as possible. With the Brexit process entering its most critical phase, the U.K.-EU trade deal, it’s far from ideal that divisions are starting to appear."
The City's concerns are about the central issue which, after nearly four years, remains an open question. How close do we want to be to the EU? Too close and we will be the vassal state that Johnson and Rees-Mogg are set against. Too far and we will lose access to the single market for some of our most powerful and profitable businesses.
About a quarter of the UK financial services revenue (£200 billion) comes from the EU, so it isn't overwhelming but I assume it's their biggest single market. Some companies favour a clean break from EU rules, while others with more to lose do not, and prefer closer alignment.
Every sector will be like financial services with potential winners and losers. The fishing industry will divide between the inshore shell fishermen who want access to the EU market for products the British don't tend to buy, while the deep sea fleet owners will want to keep EU fishermen out at all costs. Agriculture will be the same. Welsh sheep farmers need unrestricted access to European markets while others with local customers might prefer to escape CAP rules.
These divisions will be within sectors and across sectors and will impact profitability and therefore the viability of many hundreds of businesses small and large. It will be difficult to manage while trying to find a perfect position where most people are reasonably happy. Is it even possible? Is there a perfect 'Goldilocks' status which suits all? I don't think there is. The trade negotiations will be hard, long and very complex, like trying to solve a super-sized Rubik's cube which has no neat end state where all the coloured blocks align perfectly.
The status quo may not be everybody's cup of tea but after years of toil and uncertainty at the negotiating table we will find we are worse off with far more disaffected people, indeed it's possible that nobody at all will be happy at the end of it.
On another matter, I noticed this letter in The Irish Times from a Dr Cooper of Maidenhead in answer to the article by professor McCrea that I posted about recently. Dr Cooper is obviously a Brexiteer who says:
"So my advice to the good professor, and to your readers, is to relax and enjoy Christmas, because it will only take a modicum of common sense from both sides for the UK to accomplish its paramount political aim of extricating itself from that process with very little economic loss to either."
As evidence the 'loss' will be small he refers to a 2102 report by the EU Commission which says “EU27 GDP in 2008 was 2.13 per cent or €233 billion higher than it would have been if the single market had not been launched in 1992.”
I think he is referring to this document or an earlier version of it, which carries the same €233 billion figure but only up to 2006, not 2008 as the Doctor claims. However, his argument seems to be that the single market gains are too small to worry about. But he seems to forget that 2.13% of GDP is more than twice what the EU Commission spends each year. In other words membership is cost free and conferred an extra benefit of about €116.5 billion a year in 2006.
More than that, the document also says that "Delivering and completing the existing single market could potentially allow for a €651 billion additional benefit per year" from 2017 onward.
I assume when the £350 million a week lie appeared on the side of a bus, he thought it was a huge sum of money yet it represented about 1% of our economy, and was a gross exaggeration anyway. Now he says 2.13% is not really a loss!
As for a 'modicum of common sense' - well, words fail. A modicum of common sense in 2016 would have avoided four years of argument, political gridlock and a period of total policy failure which is set to last for another five years at least.
As for a 'modicum of common sense' - well, words fail. A modicum of common sense in 2016 would have avoided four years of argument, political gridlock and a period of total policy failure which is set to last for another five years at least.
These figures can be made to look big or small depending how they're presented. But if the EU can distribute 2-3-400 billion euros every year in extra regional spending, that must surely be to our advantage, either in direct grants for infrastructure in the UK or by expanding the single market's wealthy customer base elsewhere for our manufacturers. It is all good.
Now, can I wish you a Merry Christmas, perhaps our last one inside the EU for many years. Next year we will need to dig in for a long battle to return the UK to where it belongs. Of course many people in our own ranks are disappointed and dejected. Johnson is riding high at the moment but never forget Harold Wison's dictum, a week is a long time in politics. It will all start to turn sour next year and although it may seem hard to believe now, our job will become easier and easier as the consequences of the grand folly that is Brexit finally become clear.
No post tomorrow or Boxing day. Back on Friday.
No post tomorrow or Boxing day. Back on Friday.
