Economic Insights – 04/05/2018

Brexit: fighting to a standstill

Events do seem to be speeding up and may come to a crunch at any time soon but somehow I suspect Mrs May will stay in Downing Street for a good while yet. She clearly feels it is her duty to see the Brexit negotiations through to some conclusion and all the other protagonists with varying degrees of unenthusiasm need her to stay. For the Tory Brexiteers and Mr Corbyn, she is the only chance of a decisive break with the EU and for the Remainers in all parties she is still the best chance of a soft Brexit. For the EU, she offers the best prospect of reaching any deal that avoids chaos. Her obviously weak position is actually what keeps the wolves at bay! Mrs May’s biggest mistake was to charge ahead with giving notice under Article 50, whether out of genuine ignorance of what Brexit involved or an illusion that the EU would happily let the UK have its cake and eat it or both. Keeping the Tory Party together has been another priority. As a ‘reluctant Remainer’ she can hardly have been converted by the falsehoods of Messrs Johnson, Fox and Davis and has increasingly tried since to exclude them from the detailed negotiations. By now doubts must have crossed her mind that perhaps it was all too difficult and she may even welcome the mounting pressure in both Houses of Parliament. The significance of the recent votes in the Lords, many of which are very likely to be upheld in the Commons, is that a cliff-edge will be avoided however close the Government deliberately or accidentally comes to it. From this arises a logical chain: if ‘a customs union’ is a good thing why not simply stay in the current one and, if that is a good thing, how about the Single Market and, ultimately, why not just abandon Brexit altogether. It may remain unlikely that the chain will be followed all the way through but it is also far from clear where and how it will be broken. Perhaps Mrs May wants to put ‘cake and eat it’ to the test one last time before resorting to fudge and delay, which could even turn her weakness into strength. Suppose she comes clean and says the negotiations are too complex to rush while the economy is starting to deteriorate and so she wishes to postpone the UK’s departure. This would surely result in angry Cabinet resignations but even if a leadership contest were held and a hard Brexiteer elected he or she would simply end up in Mrs May’s current situation while the leadership campaign would probably consolidate and enlarge the committed Tory Remainer faction in Parliament. If Mrs May survived she would have wrong-footed Mr Corbyn by ensuring a large cross-party majority on Brexit. Meanwhile, provided she could summon up the courage, she could gain the initiative with the EU by withdrawing the Article 50 notice. I suspect it will be much messier than this and just about the only certainty is the current Cabinet cannot survive intact for much longer but even mass resignations would not resolve the impasse. Eventually, Brexit will have to be resolved by a General Election or a new Referendum.

Postscript: The Local Election results seem to confirm the divisions between cities and areas outside them, not least over Brexit. Labour should probably have done better but must have been hurt by the Lib Dem vote perking up. Best comment I have read on Twitter is: England Election Result: No overall control (no change).

Voters as divided as the Cabinet