Monday, April 15, 2019

UK in Brexit limbo until Halloween

The UK is in limbo and a state of uncertainty as another Article 50 extension puts back a possible Brexit to 31st October. The PM faced a turbulent session in the commons where she battled questions from all sides on Thursday last week after returning from Brussels with the new extension [Guardian]. Afterwards she faced more anger as she left parliament surrounded by high security and to heckling from protesters as her car exited the parliamentary estate.

Theresa May had earlier told MPs to use the Easter recess to consider their 'national duty' to resolve the Brexit crisis. But there is no sign that that will happen. Indeed, it is more likely that October will roll around without any consensus.

A comical farce

The whole sorry mess of Brexit is playing out like a comical farce as the PM Theresa May attempts to carry out her mandate to deliver Brexit.

After nearly two years of negotiation to secure a 'deal' - technically speaking just a withdrawal agreement - May has failed completely to secure support either within her own party or across the house in order that she can get it ratified.

The Withdrawal Agreement had been secured late last year but May decided not to put it before parliament before Christmas as she admitted it "would be rejected by a significant margin" [BBC].

And so off she went to Brussels to ask for changes to it despite the European Council President Donald Tusk having said the remaining 27 EU countries would not "renegotiate" the deal.

In January Theresa May put the 'deal' before parliament only to see it rejected. Again she tried in March. Once again it was rejected and she was forced to ask for an extension or either allow the UK to crash out or revoke Article 50.

The EU gave her a short extension until the 12th April. But in the two weeks after the date Britain was due to leave the EU, parliament seemed unable to come to any consensus on anything.

A whole series of indicative votes failed and 'May's deal' failed to get a majority on a third attempt.

"Please Sir, can I have some more"

Rather like a schoolboy or girl asking for more time to complete their assignment Theresa May once again, cap in hand, returned to Brussels asking for an extension [France24].

The prime minister arrived with no real reason for an extension other than she had now decided to begin discussions with the opposition party in order to break the impasse following a marathon cabinet session.

And while there was some consternation emanating from Macron on the French side, the EU eventually decided to allow an extension until the 31st of October with a review of proceedings on the 20th of June.

The dates on the calendar were particularly poignant. And the fact that an extension was granted was also odd given that May's request for one gave no concrete plan or reason.

In fact it seemed clear that while the EU could have quite legitimately refused an extension since May was essentially just asking for more time, the EU did not wish to be seen to be deliberately forcing her hand into making a decision to either revoke or jump off the cliff.

Should May have failed to revoke article 50, the EU could have been seen to have helped push the UK off the proverbial cliff.

But by allowing an extension the EU has also gone back on its stated proclamation that an extension would only be granted if there were a new plan.

Simply stating she was in talks with Corbyn does not amount to a new course of action. Even if, as some within Labour want, May shifts her red lines and shows a leaning towards a customs union, the Withdrawal Agreement is - as the EU has stated any times - still not up for renegotiation.

Even if May were to relax her hardline approach - admittedly not as hardline as the likes of the ERG want of Brexit - the extreme hardliners within her party and the DUP might be joined by the less extreme Tory Brexiters.

So the chances of pushing her 'deal' through still remain somewhat implausible.

European Elections

Following May's decision to talks with Labour, many Tories were said to "be fuming". Theresa May was now "getting into bed with a Marxist," ERG hardliner Mark Francois said on College Green after May returned with an extension.

Meanwhile others were calling for her resignation.

Furious that she had agreed to the long delay, breaking her own pledge that, "as Prime Minister", she would not delay beyond the end of June, hardline Brexiter Peter Bone said, "If the PM intends to keep her word, can we expect her resignation later tonight?"

Only days before the media reported growing divisions in the party with funding drying up and [BBC].

The Observer reported she had been warned by her mutinous MPs that they would move to oust her if the UK was forced to take part in European elections and extend its EU membership beyond June.

The paper also reported that MPs feared many Conservatives would boycott the poll, increasing the chances of the far-right and Nigel Farage's new Brexit party [Guardian].

However there is talk, even amongst hardline UKIP supporters that they would not vote in European Elections.

Meanwhile some were calling on voters to spoil their ballot papers rather than vote for a candidate [Telegraph].

Such actions could of course benefit pro-European parties and potentially leave other parties left out in the cold should MEPs take their seats in June. And if Britain were to remain in the EU beyond October the Tories and other hardline parties may well feel rather stupid.

Extension and review

But what of the extension? The EU has put two dates on the calendar. The first date is June 20th when it will review Britain's progress on the Brexit withdrawal process.

If the Withdrawal Agreement has still not passed then MEPs with take their seats on the 2nd July.

Mid-August poses another issue. This is the approximate time by which the prime minister would need to call a general election to be held before the article 50 extension expires – in order to meet the requirements of the Fixed-Term Parliaments Act 2011, and also the timetable set out in the Electoral Registration and Administration Act 2013, which requires 25 working days for an election campaign.

In early September MPs will be returning from summer recess, unless recalled early, to deal with Brexit crises and contemplate any possible general election or second referendum.

And on 31st October the six-month article 50 extension will expire once again creating another new possible date for Britain's crashing out without a deal.

Trick or treat?

The choosing of Halloween as the new extension date has created many opportunities for headline writers.

The Guardian saw the new Brexit date as "very appropriate" with another column ran with the headline; "Halloween Brexit is a fitting outcome for the zombie prime minister" [Guardian].

The Halloween jokes on social media were prolific with suggestions of Jacob Rees-Mogg Halloween masks to puns on horror films such as the Exorcist, renamed Brexorcist and depicting Theresa May with her head rotated the wrong way [iNews].

Trick or treat? You couldn't quite make it up, said the BBC.

But the extension is bittersweet for all sides.

In its simplest sense, the prime minister asked for a delay so that she didn't open Pandora's Box.

Should she have revoked, as the clock ticked towards the default time that Britain was due to leave the EU on the 12th of April, she would have unleashed a wrath of fury against herself and her party.

On the other hand if she had allowed a no-deal Brexit it would likely have precipitated economic turmoil and thrown the country into uncharted waters.

After May went cap in hand to Brussels, the EU eventually said yes to a new timetable. But the new October deadline might not solve very much at all.

Impasse unlikely

There appears to be as much division within parliament as there was before and the chances of the Withdrawal Agreement passing seem as remote as ever.

Given the 'deal' cannot be changed or renegotiated, it seems rather futile discussing anything with the opposition as May has been doing.

May's red lines, of no single market or customs union, have essentially created the Withdrawal Agreement she has attempted to pass through parliament, and the particularly contentious Irish backstop.

Should she not have ruled out a customs union, the Irish backstop may well not have been necessary. But now it's too late to change since the negotiation is at an end.

And so all the extension does is to enable a little more can kicking while business and the UK population waits with just as much uncertainty as to what might happen on the 1st November.

No-deal planning

Businesses - and many individuals - have been making preparations for a no-deal Brexit for some time. Companies have been stockpiling - often at great cost in terms of storage. So too have many individuals, fearing panic buying or other disruptions to supply chains could result in shortages.

The two week delay after the March 29th Brexit date was cancelled was a slight inconvenience. But creating a six month delay creates many logistical issues for anyone stockpiling or planning for a no-deal Brexit.

Does one continue to keep a stockpile going? And if one does decide to continue, stock has to be constantly rotated especially for perishables. The government has reportedly stepped down its no-deal planning [Guardian]. But this does not necessarily guarantee a no-deal Brexit won't happen, perhaps just less likely.

For EU citizens there is no more certainty as regards their status, only that there will be a delay before they'll need to act.

For everyone that Brexit will likely affect, be it a hard no-deal Brexit or leaving on the terms of the Withdrawal Agreement, the next six months only offer a brief respite and leave them in limbo.

What's next?

Theoretically, the UK could leave on Halloween, but given the previous adjustable dates of 29th March and 12th April, it's not beyond the realms of possibility of another extension later this year.

If MPs manage to break the deadlock and agree on a withdrawal agreement in good time before 31st October, the UK can leave on the first day of the month following the passing of a deal. But few believe the deal will ever pass.

As parliament went into recess for the Easter break one could be forgiven for thinking Brexit was all but over.

College Green - from where the world's media have broadcast their reports about Brexit was almost deserted on Friday morning and most of the gazebos had been taken down.

On Friday much of the news media had veered away completely from Brexit news. Indeed it reminded one of those days long ago when there was something else in the news besides Brexit.

The lull will not last of course. In two short weeks MPs return to parliament, and there will once again be a glut of  opinion and debate surrounding Brexit and the upcoming European Elections that Britain is now obliged - due to the extension - to take part in.

And so the circus continues….

tvnewswatch, London, UK

Thursday, April 04, 2019

No-deal still likely as the Brexit chaos continues

Only a day before Britain was originally set to leave the European Union no-one was clear what would happen next. An extension had been secured until 12th April such that the PM might get her Withdrawal Agreement passed. But despite a busy week in both cabinet and parliament nothing is certain.

Withdrawal Agreement rejected

The Withdrawal Agreement, secured by Theresa May with the EU last year, was rejected by parliament twice, once in January and again in early March. This forced Theresa May to hold two more votes which she had promised. The first was to establish whether parliament would take a no-deal Brexit off the table whilst the second vote was to ask whether May should seek an extension from the EU.

No-deal was firmly rejected by parliament, with 321 votes against leaving without a deal to 278. However, whilst the vote was not binding it did lead to parliament agreeing in sending Theresa May scuttling back to Brussels to ask for some more time.

Seemingly begrudgingly the EU gave Theresa May until 12th of April to secure her 'deal', and if secured Britain would leave 'in an orderly' fashion on 22nd May. Should her 'deal' not be passed however, Britain would - by default - crash out on the 12th April.

Of course Britain could go back to the EU and request more time. However, just as the the Speaker of the House dismissed a third vote on her deal without substantial changes, the EU seemed likely to dismiss any further requests for an extension without a plan.

Indicative votes - round 1

On Wednesday last week, with only 15 days until the new possible exit date of 12th April, MPs voted on a number of tabled motions, referred to as 'indicative votes'.

However all eight motions put before parliament were rejected. In a repeat of the earlier move to remove no-deal from the table, a no-deal Brexit was firmly dismissed with 400 rejecting such a proposal whilst only 160 backed it.

A so-called Common Market 2.0 or Norway plus option garnered only 188 votes in support while 283 rejected it. Meanwhile another proposal of EFTA & EEA was also rejected by 377 against with only 65 supporting the motion.

A UK wide customs union option did gather a little more support but again there was almost a 50/50 split with 272 MPs rejecting the motion while 264 supported it.

Corbyn's so-called alternative plane also failed with only 237 voting for it whilst some 307 voted against.

There was also no support in the house to Revoke Article 50 to avoid a no-deal Brexit as only 184 voted in favour while 293 rejected the motion.

Meanwhile a Confirmatory public vote motion - or second referendum - also lost with only 268 backing the idea whilst 295 rejected it.

And the last proposal of Preferential arrangements was rejected out of hand with 422 dismissing it while only 139 back the motion.

Deadlock

And so nearly a week on from when parliament sent May to Brussels to buy more time, parliament seemed to be no further forward and in apparent deadlock.

No proposal has been agreed upon, though there is a clear dismissal of a no-deal Brexit with 400 against 160. This was an even more emphatic dismissal on the previous week's vote. In that vote 321 voted to remove a no-deal from the table while 278 had voted in favour of keeping the prospect in place.

While parliament's opposition of a no-deal Brexit has apparently grown there doesn't appear to be much growth in support for the Withdrawal Agreement.

On the day Britain was originally set to leave the European Union the Withdrawal Agreement was once again rejected [BBC].

The government lost by 344 votes to 286, a margin of 58, and meant the UK has missed an EU deadline to delay Brexit to 22nd May and leave with a deal. Speaking afterwards the prime minister said the UK would have to find "an alternative way forward", which was "almost certain" to involve holding European elections.

The margin of rejection of the deal was certainly down on the March and January votes [391 against to 242 for, and 432 against to 202 for respectively], but is seems clear that getting the extra 50 plus votes in a possible fourth vote is very unlikely [Guardian].

Indicative votes - round 2

After the weekend MPs returned to discuss and vote upon a second, but smaller, list of proposals. But once again there was no consensus and all four indicative votes failed [BBC].

Speaker John Bercow chose four proposals to put before MPs; a customs union, a common market 2.0, a confirmatory public vote and a parliamentary supremacy proposal which would seek to rule out no-deal and revoke Article 50 if no extension could be secured.

But as in the previous week's round of votes there was no consensus. Ken Clarke's customs union plan lost by only three votes, defeated by 276 to 273.

The Common Market 2.0 plan - put forward by Conservatives Nick Boles, Robert Halfon and Dame Caroline Spelman, Labour's Stephen Kinnock and Lucy Powell, and the SNP's Stewart Hosie - was defeated by 282 to 261

A motion put forward by Labour MPs Peter Kyle and Phil Wilson calling for a confirmatory vote failed by 292 to 280 votes. Meanwhile Joanna Cherry's proposal was defeated by 292 to 191.

Ticking clock

With the clock ticking down to a no-deal on the 12th April, Theresa May was now faced with few options.

She could attempt to put the Withdrawal Agreement before parliament for a fourth time but that would have to be approved by Wednesday 10th in order that the EU can ratify the agreement and approve the 22nd May extension.

However, it appears that horse has already run and Theresa May has to come up with another plan to present to Europe in order to obtain an extension.

Following a cabinet meeting on Tuesday 2nd April which lasted more than 5 hours Theresa May announced she was to consult with the leader of the opposition Jeremy Corbyn in order that she might establish cross party support for a proposal she might present to EU leaders [BBC].

In an address to the country the PM said she was "taking action to break the log jam," by "offering to sit down with the Leader of the Opposition to try to agree a plan that we would both stick to, to ensure that we leave the European Union and that we do so with a deal."

Of course, as the EU have so often repeated there will be no renegotiation and there is only one 'deal' on the table. Theresa May appeared to recognise this in saying that, "Any plan would have to agree the current withdrawal agreement."

But as has already been seen through the votes on the WA itself as well as a series of votes on various Brexit related motions, there is almost complete deadlock in parliament.

Whilst there was some positive news emanating from the meeting between the PM and Jeremy Corbyn, there were signs that any resolve would be difficult [BBC].

While Labour and Downing Street described the discussions as "constructive", Jeremy Corbyn himself described them as "useful but inconclusive." [BBCGuardian].

Fantasy plans

There has been much discussion concerning the possibility that the PM and Corbyn could present a plan of a softer Brexit to the EU. But this could be seen as somewhat incredulously by EU leaders.

There is growing impatience amongst EU politicians with Britain. Indeed there has even been talk that Britain should just leave. And while many are still sad to see Britain disgrace itself, Europe seems almost resigned to Britain crashing out on WTO rules.

Britain won't know until Thursday 11th whether the European Union will offer an extension to Article 50. Should there be no extension offered, Britain will crash out of the EU the following day.

If an extension were granted it could well last many months and force Britain to take part in EU elections.

With all the indecision and lack of consensus shown in parliament it seems unlikely that the PM will have an acceptable plan to present to Brussels. Thus as time draws nearer to Friday 12th of April Theresa May will have a choice of either revoking Article 50 or letting Britain crash out of the EU. Will it be a case of "Torschlusspanik"* and May cancelling Brexit? Or will she let Britain crash out and sail into an uncertain economic future?

There is one sticking point as regards the revocation of Article 50. Last year the European Court of Justice ruled that Britain had the power to revoke Article 50 and cancel Brexit. But the decision to withdraw the notification has to be made in line with the country's "own national constitutional requirements" which could mean that any revocation would have to be put to a parliamentary vote.

Given this scenario Britain could potentially crash out by accident since a parliamentary vote cannot be guaranteed to produce the desired result.

Nearly three years after the referendum there is still only further uncertainty ahead.

tvnewswatch, London, UK

*Torschlusspanik is a combination of three German words, and literally translated means "gate-shut-panic." Apparently the term dates back to the Middle Ages in reference to the panic medieval peasants might have experienced as they rushed to make it back inside the city gates before they closed at nightfall

Wednesday, March 20, 2019

Brexit: Chaos, chaos and more chaos

Despite parliament having rejected the prospect of leaving the EU without a deal, a no-deal Brexit in 9 days time, or a no-deal in June if parliament can't agree on May's deal, still seems almost inevitable.

May's way or no-deal

Theresa May has been accused of riding "roughshod over parliament" and deliberately running down the clock. Speaking to Adam Boulton on Sky News, Conservative defector Sarah Wollaston said May was essentially saying it was "My way or over the cliff."

Yet May has been thwarted in bringing her deal back to parliament for a third time in the current session by the Speaker of the House John Bercow unless substantial changes were made.

Speaker stops third vote

The ruling was greeted with dismay by hardline Brexiters who feel he was deliberately trying to frustrate Brexit.

"I've never been a fan of John Bercow," said one member of the ERG Andrew Bridgen speaking outside parliament on Tuesday 19th March but added, "I don't want Mrs May's deal to go through."

Bridgen's solution would, he said, be a change in leadership. "We need a new prime minister, a Brexiteer, someone who believes in Brexit."

As to his choice of leader he thought Boris Johnson was a possibility but suggested Dominic Raab as his choice, a man who only recently said he had only understood the importance of Dover as a major port [Sky News].

Voices on College Green

This week most politicians appeared to have gone to ground with very few making their usual jaunts to College Green to speak to the assembled media. Last week, as MPs voted on a wide range of Brexit related motions, the area was awash with MPs expressing their fears, anger and frustrations.

Amongst Brexit supporting MPs there voices of despair. Charles Walker, a Conservative MP, told the BBC's Laura Kuenssberg that if the PM's Brexit deal fell on Tuesday there would have to be a general election within months, or even weeks [BBC].

He backtracked a little when speaking to Phoenix TV, based in Hong Kong, the following day but nonetheless predicted there was "more chaos" to come.

It is perhaps with this chaos in mind he also expressed the view that Brexit might not have been a good idea after all. Speaking to BBC's Newshour he said, "I will curse myself for ever thinking that a referendum was a good idea."

Game over for May

Meanwhile Lord Heseltine said the "game was over" for Theresa May. Speaking to Sky News, he said the PM's decision to allow a free vote on whether to rule out a no-deal Brexit indicated she had "lost control". Like Walker, Heseltine also suggested there might soon be a change in leadership and that her own Cabinet would soon give her "a tap on the shoulder" and remove her from office. "I think her position is impossible but I think it has been impossible since she became Prime Minister." [Express]

Withdrawal Agreement rejected

On Tuesday [12th March], the Withdrawal Agreement was once again rejected by MPs with 391 voting against it with 242 voting for it [BBC].

It wasn't the massive rejection seen in January when Theresa May sustained the heaviest parliamentary defeat of any British prime minister in the democratic era after MPs rejected her Brexit deal by a resounding majority of 230 [Guardian].

But despite MPs having voted down May's 'deal' by 149 votes in the latest bout, the fourth-largest defeat of the government in the history of the Commons, the PM seemed insistent on holding yet another 'meaningful vote' on her Withdrawal Agreement, which had been pencilled in for Tuesday 19th March.

However, that was scrubbed after the intervention by the speaker.

Seeking an extension to Article 50

With a non-binding rejection of a no-deal Brexit parliament on Wednesday 13th March, MPs voted on Thursday the 14th March on a motion that Theresa May should seek an extension to Article 50.

Meanwhile the European Union is looking at Britain in despair. On Tuesday 19th March both French and German ministers expressed their frustration with the Brexit fiasco.

Nathalie Loiseau, the French Europe Minister [who, by the way does not have a cat called Brexit - France24], seemed incredulous concerning an extension. "Grant an extension? What for?" she told the Austrian television news station ORF and other assembled journalists [Twitter], "Time is not a solution, it's a method. If there is an objection and there is a strategy then it has to come from London."

Michael Roth, the German Europe Minister, also called for sensible reasons for an extension. "The clock is ticking and time is running out," he told the assembled media. "We are really exhausted by these negotiations and I expect clear and precise proposals of the British government why such an extension is necessary."

May's simply asking for an extension in the hope that with time she might persuade MPs to back her deal is unlikely to get the EU to offer any concessions.

How long is a piece of string?

The PM is expected to ask for a short extension. However, it is the EU and not May who can set the parameters and provisions of any extension. Moreover any extension has to be agreed unanimously by the 27 member states.

Theresa May and Brexit are both facing a ticking time bomb. The PM has been adamant thus far that Britain will leave on 29th March, something she has said 108 times in parliament. However unless Britain crashes out without a deal this seems unlikely.

During PMQs Theresa May said it would be "unacceptable" to put forward MEPs for European elections as it would be a betrayal to those who voted for Brexit.

"As PM I'm not prepared to delay Brexit any further than 30th June," she told the Commons, and that she had drafted a letter to the President of the European Council, Donald Tusk, setting out her request for a short extension. But only an hour after her address to parliament there were noises coming out of Brussels that any extension would have to be longer.

Running down the clock

Exactly 1000 days since the referendum the prime minister was accused by the leader of the opposition Jeremy Corbyn of "running down the clock" and risked damaging Britain's future and creating a "national crisis".

Theresa May remained arrogantly forthright. Despite her deal having been rejected twice, she insisted her deal was still the only choice. "I will deliver on Brexit," May insisted, "That is what the British people deserve."

No-deal still a risk

While the UK parliament has rejected the idea of leaving the EU without a deal, the vote is not binding and if there is no extension or Article 50 is not revoked Britain would - on the 29th March - leave without a deal by default [CNN].

On the subject of revoking Article 50, Theresa May has adamantly said that is "something I will not do". So unless she makes a U-turn on that commitment, only an extension could prevent Britain crashing out on 29th March.

And so on Thursday 14th March parliament voted to call for an extension by 413 votes to 202 [BBC]. And today May has told parliament she is seeking a short extension.

However, an extension can only be requested and is not guaranteed. And while it not expected the EU would reject an extension it does require unanimous agreement from all other 27 member states. The EU are also likely to ask for good reasons for such an extension.

Mood in the EU

The mood from a long debate in the European Parliament on Wednesday last week [13th March] seemed to indicate that many member states would likely only ratify such an extension if Britain were to put the issue back to the people, though the prospect of a general election might also sway thinking - though May has dismissed both options [Twitter]. 

The length of time could also be stipulated by the EU. This might well mean that Britain, whilst planning on potentially exiting the EU within weeks or months might be put in the rather awkward position of holding European Elections in May [Reuters].

Hardliner standoff while PM blackmails MPs

Some commentators have suggested that Theresa May might secretly want her request for an extension rejected. The thinking behind this is that she might then be able to return to parliament and force a third vote on her 'deal' with less than a week until Britain crashes out of the EU by default.

But the numbers needed to back her deal still aren't there. The DUP have indicated they would not fall behind the deal unless the ERG backed her deal and they have said they would not back it without DUP support. Similarly Labour Brexiters have also declared they would be unlikely to come forward to back the deal without the DUP and ERG supporting the deal.

Like a scene from the end of Reservoir Dogs the hard liners are in a stand-off with each other over who might put their guns down first. Meanwhile Theresa May stands before parliament metaphorically hold a gun to the country's head proclaiming that MPs should back her deal or Britain will crash out by default.

Life outside the Westminster bubble

Beyond the Westminster bubble one could be forgiven for thinking that life was just ticking on by and that Brexit is of no concern to anyone.

Tourists still wander the streets. People board trains on their way to and from work. Pubs, bars and restaurants continue serving customers and traffic flows London's streets.

In 9 days, should there be no extension, Britain could be very different should it crash out of the EU.

While some pro-Europeans have been encouraged that MPs have rejected a no-deal Brexit and sought an extension there are other voices that suggest the recent votes in parliament only amount to a stay of execution [BBC]. Thus the prospect of a no-deal Brexit remains very real indeed.

The effects of a no-deal may take a few days to kick in, but crashing out without a deal could soon see shortages in shops and within months very dire economic consequences.

Brexit fatigue

Many people are suffering from Brexit fatigue and perhaps blindly just want the sorry saga to end even if Britain leaves without a deal, perhaps without a full understanding what it would really mean. But even for ordinary citizens outside the bubble of British politics the effects of a no-deal will suddenly focus minds. But by then it will be too late. It will be too late to turn back. Britain will be on its own.


tvnewswatch, London, UK

Wednesday, February 06, 2019

Project fear becoming a reality as no-deal Brexit looms

During the referendum campaign the suggestion companies would uproot and shift to Europe or elsewhere was dismissed as project fear.

However with less than two months to go until Britain likely crashes out of the EU, many companies have either left, downsized, reduced investment of shifted some operations abroad [Guardian / Bloomberg / The Scotsman].

Insurance companies shifting strategy

Since the referendum a number of companies have changed their strategy. The US insurance company AIG has set up a new company in Luxembourg for EU clients [Reuters] whilst the Admiral Group insurance company is moving some of its operations to Madrid and Seville to serve its European business outside of the UK [Bloomberg]. And the insurance giant Chubb is moving its European headquarters to France [Chubb]. Hiscox, another insurance company, has set up a new base in Luxembourg [Telegraph].

Other insurance companies making moves include Liberty Speciality Markets which is also setting up its EU headquarters in Luxembourg [Liberty Speciality Markets] as has the RSA Group [RSA Group]. And Lloyd's of London, the world's oldest insurance market, has set up a new subsidiary in Brussels and is moving some roles from London [Standard].

Banks & financial moves

Several banks and other financial institutions have also made move. Barclays bank plans to move 190 billion euros of balance-sheet assets to Dublin. And the exchange operator CME Group is moving its $240 billion-a-day European market for short-term financing, the largest in the region, from London to Amsterdam to guarantee continental firms can continue to use it if there is a no-deal Brexit. It's also moving its $15 billion-a-day foreign-exchange forwards and swaps venue to the Dutch capital [Bloomberg]. Cboe Global Markets, another exchange operator, is also shifting most of its European equities trading to Amsterdam [Bloomberg]. 

Pantheon, the private equity and infrastructure investor, has meanwhile set up a new base in Dublin [City AM]. 

Deutsche Bank, meanwhile, is repatriating at least 400 billion euros of balance-sheet assets [Bloomberg].  JPMorgan is also moving balance-sheet assets to Frankfurt to the value of 200 billion euros [Bloomberg].

Whilst it is perhaps understandable that financial firms might shift given the EU regulations concerning services, other companies have also made shifts abroad.

Media and tech 

Media company Discovery, the US broadcaster, is setting up a new European HQ in the Netherlands. In a statement the company said the move was one made that "ensures continuity" of "services for the viewer across Europe" [Broadband TV News]. However, the company was retaining "a large hub in the UK" at its London office which houses more than 1,000 people. Britain's former phone monopoly BT is also seeking a new data protection base in the EU.

Whilst the focus of Brexit has been on manufacturers and financial groups many have failed to realize the effect Brexit will have on media companies. Akin to global banks, international media companies like Discovery, Sweden's Modern Times Group and Time Warner's Turner International use UK licences to access the European Union. And these companies have had to make the decision as to whether they should relocate some operations to preserve that access.

"No one running a business of any scale can wait to the end of negotiations before deciding what to do," Adam Minns, executive director of the Commercial Broadcasters Association, said back in August 2017 [Independent]. The process of acquiring office space, moving staff and shifting technical support could take up to a year. And so Brexit damage has already been done as companies have already been forced to make the shift.

Slow burn hiding real impact

It is the slow burn of Brexit and the gradual trickle of companies leaving that has helped hide the Brexit effect. And this has given many a false impression that Brexit hasn't had a marked impact. But there was never going to be a mass exodus on any one single day. Dozens of companies all leaving on 29th of March or the day after the referendum would certainly make headlines. But the single reports of a company shifting out of the UK are soon forgotten about.

Tariffs & supply chain concerns

Manufacturing companies have also made a shift, partly out of concern over tariffs that might be imposed after 29th March 2019. The seller of Clarks shoes, C&J Clark, plans to open a distribution centre in continental Europe [Bloomberg]. 

And Dechra Pharmaceuticals, the maker of animal medicines, is looking at setting up dual testing facilities in the UK and EU in preparation for Brexit [Bloomberg]. 

Publishing company Monocle, the global affairs magazine, is moving its printing from the UK to Germany over concerns about difficulties exporting if there's a no-deal Brexit [Bloomberg]. And Ryohin Keikaku, which retails products under the Muji brand, is considering moving its European headquarters out of the UK to Germany [Bloomberg / Business Insider].

Panasonic has said it would move its European headquarters from the outskirts of London to Amsterdam effective 1st October [Bloomberg / BBC / Dutch News]. 
The list of companies goes on. Renishaw, maker of precision measuring and calibration equipment is opening a distribution warehouse in Ireland, whilst Schaeffler, the German maker of ball bearings, used in cars and the London Eye Ferris wheel, is closing two of its three UK production plants, which could cut its workforce by half [Bloomberg / BBC]

The Japanese consumer electronics firm Sony is moving its European domicile to the Netherlands [FT / CNN]. The Surgical appliances manufacturer Steris plans to move its corporate base to Ireland from the UK [Bloomberg / Irish Times].

Stifel, the US firm, will buy the brokerage operations of Germany's MainFirst Holding, ensuring that it can keep offering financial services in the EU after Brexit [Bloomberg]. And Swissquote, the Swiss bank, is planning to move its European retail business from London to Luxembourg [Bloomberg].

TransferWise, a money transfer company is opening an office in Belgium [FT]. Travelers, the insurance company, is setting up a new subsidiary in Dublin [Global Banking & Finance]. 

The Hut Group, a company which sells beauty, wellness and luxury products online, is constructing a facility in Wroclaw, Poland [Bloomberg].

Automotive industry hit

Of course the automotive industry is one that has commanded headlines when it comes to Brexit. Vauxhall is said to be considering closing one of its two British factories [Bloomberg]. 

Meanwhile Nissan has confirmed that the new X-Trail originally planned for its Sunderland plant will instead be made in Japan [BBC]. This despite government Brexit bribes being offered to the company of up to £80m [Sky News].

Jaguar Land Rover meanwhile temporarily paused production at its engine factory in Wolverhampton in the run-up to Christmas, citing Brexit as a factor contributing to fluctuating demand.

Stockpiling

Whilst some companies have decided to ride the storm, at least for the short term, there are quite a number that have already begun to stockpile. This is of course at a time when Britain is not at war. Nonetheless the concerns over supplies and increased tariffs have prompted businesses to plan for the worst.

Amongst those stockpiling include Airbus, the European company, which is said to be stockpiling parts to maintain production rates in case of customs delays. Bentley, the carmaker, is building up stocks of imported parts as is Bosch, the world's largest auto-parts maker

Brompton Bicycle, the foldable bike maker, has even rented a warehouse near Heathrow to store an extra month's worth of supplies.

Associated British Foods, the maker of Ryvita crackers, Twinings tea bags and Jordans muesli is also buying key items like food, packaging and machinery ahead of time. And Creative Nature, the superfood firm is stockpiling hemp seed and other ingredients for its snack bars.

Heineken, the Dutch brewer, is stockpiling thousands of pallets of goods to make sure beer taps don't run dry. LVMH, the French maker of high-end beverage brands including Moet & Chandon champagne and Hennessy cognac has added four months of wine and spirits inventory to the UK. Majestic Wine is meanwhile planning to stock an extra 5 to 8 million pounds of inventory to mitigate any potential supply chain disruption.

And Imperial Brands, whose tobacco brands include Davidoff, will hold about 30 million pounds worth of cigarettes to mitigate possible supply disruptions. That equates to more than 2.6 million packs of 20 cigarettes each. So at least perhaps smoker won't get too twitchy after a hard Brexit.

With concerns rising over the supply of pharmaceuticals AstraZeneca, the drugmaker, is increasing its stockpile of drugs to four months from three and spending about 40 million pounds [$51 million] to duplicate UK-based testing facilities that prepare products for distribution.

And the list goes on with Joules, the clothes retailer, Marks & Spencer, Cadbury's owner Mondelez International, Nestle, pharmaceutical giant Merck, the drugmaker Novartis and Pfizer all making plans to stockpile. Even Pets at Home is stocking up of dog and cat food.

Cancelled plans, investment & job cuts

Others, whilst remaining in the UK, have shelved plans in terms of investment or expansion, and in some cases have cancelled production of certain products.

All of this has an effect on jobs. Thus far job losses directly connected to Brexit are not significant, though for those who have lost their job it is of course extremely significant. The numbers might not be large now, but all the signs point to far more significant losses in the coming weeks, months and years should Britain crash out of the EU.

Bank of America, which has 4,500 UK staff, is moving 400 jobs to Paris, mostly from London. Barclays, which has 10,000 UK staff, has reported that it will move 150 jobs to Dublin, which will be its main EU hub after Brexit. They are also creating 150 new roles in the Irish capital.

And Citigroup, which has 9,000 UK staff, has reported that it will move 250 jobs. Credit Suisse, with 6,600 UK staff, has reported that it will move 250 jobs to various EU cities. Deutsche Bank has reported that it will move 500 jobs to Frankfurt of its 9,000 UK staff. Goldman Sachs, which has 6,000 UK staff, has reported that it will move 700 jobs. HSBC, which has 5,000 UK staff, has reported that it will move 1,000 jobs to Paris. And JPMorgan, which has 16,000 UK staff, has reported that it will move 400 jobs. Other finance companies are also relocating staff including Societe Generale, Standard Chartered and UBS which between them are sending more than 700 staff abroad.

On the face of it such relocations may not look significant. In many cases the numbers equate to only 5% of the company's London workforce, though in the case of HSBS they are shifting 20% of their staff . Nonetheless, should uncertainty continue and operations become more difficult for these firms the numbers could increase dramatically.

In other sectors the losses are already sizeable. Jaguar Land Rover, Britain's biggest carmaker plans to cut 4,500 jobs globally, representing roughly 10% of its workforce, citing Brexit as an indirect factor. And since October 2017, 650 people have lost their jobs at the Ellesmere Port factory where Vauxhall Motors builds Astra hatchbacks.

Perhaps one of the biggest blows was Japan's Hitachi Ltd putting a £16 billion nuclear power project in Britain on hold [Guardian / Reuters / BBC].   

Warnings against a no-deal Brexit

Many companies have warned for some time that they may have to seriously consider their future in Britain, especially in the event of a no-deal Brexit. And those warnings have have grown in the last few weeks.

The message from many businesses is that the government take no-deal off the table saying it would be disastrous for them and the country [Standard]. 

Airbus has been particularly outspoken. Its CEO Tom Enders said the European aerospace giant may have to move future investments out of the UK in the event of a no-deal Brexit. "Make no mistake, there are plenty of countries out there who would love to build the wings for Airbus aircraft," Enders said in an unprecedented video message [Guardian / Airbus].

Ford, too, has painted dire warnings. The automaker is considering closing factories in Europe and has cautioned any action might be worsened in a no-deal Brexit. In January this year the company said a no-deal Brexit would mean costs of $800m in 2019 alone [Guardian] a repeat of warnings it gave only four months previously [BBC].

BMW's CEO Harald Krueger has said that the carmaker "would be forced to build in the Netherlands." The company has also said it would bring forward a four-week stoppage for routine maintenance at its Oxford factory to April 1, a few days after the UK is planned to leave the EU.

Bentley's boss has also pointed at the risks of a no-deal and said a failure to reach a Brexit deal would be "quite damaging" to annual profit in the worst-case scenario, limit the company's ability to invest and could lead to its plant closing for an additional few days at Christmas or Easter.

PSA Group, the maker of Peugeot, Citroen and DS vehicles, has been more cautious in its public statement. But CEO Carlos Tavares has warned that business could face dire consequences without a deal but says that in the event of a hard Brexit it would enter into talks with unions in the UK before taking any tough decisions on production.

Meanwhile Toyota says it anticipates halting production at its Midlands factory, which has 2,500 employees, in the event of a no-deal Brexit.

These are just some of the effects on British industry because of Brexit. Britain has already lost the EMA [Guardian] as well as the European Banking Authority [Guardian]. Britain's disconnect from Euratom [Sky News], Galileo as well as security agencies such as Europol [BBC] are likely to affect Britain's place in science and create uncertainty concerning security.

Hard line Brexiters & WTO myths

There are of course those within the Brexit camp that will maintain that much of this is project fear or that Britain can renegotiate deals and regulatory alliances with other partners. This is true to some extent. Britain can of course negotiate new trade deals. But these could take decades simply because of the lack of available trade negotiators and the average time it usually takes to get a trade deal negotiated. And as for the much lauded WTO Article 24, which Brexiters are claiming could provide a framework for Britain moving forward, the idea is just fanciful [Bloomberg]. Indeed the first major stumbling block would be getting the EU to sign off on it. The UK can't sign an Article 24 deal unilaterally; it would require agreement from the EU. And that is extremely unlikely as it would mean the EU saying goodbye to the £39 billion divorce settlement, amongst other things. Thus Britain would have to drop back to a default position and begin trade deals whilst operating on punitive tariffs. And whilst such deals are being discussed, business will have to make the decision as to whether it's economically viable to stay in the UK.

For Japanese manufacturers such as Nissan it looks almost certain that it will eventually wind up operations in the UK, especially given the fact that Japan has recently signed a free-trade deal with the EU. How could Nissan UK remain competitive given the high tariffs on cars and car parts under WTO rules [BBC]?

It isn't just the manufacturing base under threat. Agriculture is likely to be decimated after a hard Brexit. From fresh fruit, vegetables and grain to meat and dairy exports, all will be affected. Without a free trade deal with the UK, which could take years, Britain would be now selling such products at an increased cost because of WTO tariffs. For fresh fruit, vegetables and grains this would mean tariffs of around 10%. For meat exports the effect will be far more significant.

Just over 80% of total beef exports are to the EU, highlighting the significance of the EU market to the UK beef industry. The majority of beef imports into the EU, from non EU countries, are subject to ad valorem tariffs of 12.8%, plus an additional fixed amount that can range from €1,414 to €3,041 per tonne, depending on the product. These tariffs could account for well over 100% of the price per unit. Under a 'no deal' scenario, UK exports could be subject to these tariffs, which would limit access to the EU market. At the time of writing [January 2019], no information is yet available regarding the rate at which UK import tariffs would be set in the event of a 'no deal' Brexit [Project Blue PDF]. 

Suffice to say any significant price increase would make British beef, and other meat, noncompetitive and too expensive for EU consumers. The EU would simply shop elsewhere with countries with which it has trade agreement or trade within its own borders. Brexiters have argued that Britain might simply sell to someone else. But this fails to understand several things. One is the so-called gravity of economics - whereby countries do the most trade with their nearest neighbours. Secondly other markets may - and are quite likely - to already have ample supplies of meat or other products Britain might be trying to sell them. Furthermore, given that Britain would - at least initially - only have default WTO tariffs under which to trade, they would be in no better a position to trade with markets further afield than with the EU market on its front doorstep.

It is perhaps no surprise that some government departments, fearing a no deal Brexit, are already making plans to implement mass slaughter of livestock and burn or otherwise dispose of the carcasses.

Sunlit uplands or a mad max apocalypse?

It is hard to see the sunlit uplands that Brexit was supposed to bring. For many rationally minded people the view won't be sunlit. Rather is will be lit by the burning of thousands of unwanted carcasses whilst police and army patrol the streets to quell civil unrest in the wake of food and medicine shortages. Maybe it won't be a 'Mad Max apocalypse that former Brexit secretary David Davis dismissed as scaremongering [BBC]. But neither will it be the utopia painted by some Brexiters.

Economists are already raising concerns about a global recession, precipitated by US president Donald Trump's trade war and also Brexit. The Eurozone is not entirely stable, economically speaking - indeed Italy recently fell into a technical recession. And China's growth reduced in the last quarter of 2018.

However, Britain's economic outlook is even more dire. And much damage has already been done. Indeed the latest economic data suggests the economy has been brought to a near-halt as firms grow increasingly anxious about Brexit [Bloomberg / Guardian / Reuters / BBC]. At a time when being part of the world's biggest free-trade block would held Britain ride the storm of another global recession, the country is instead severing ties and going it alone.

The sea is likely to get very rough in the coming months and years - Brexit or no-Brexit - and Britain is going to find it very difficult navigating let alone surviving by itself.  Weary of being outpaced by its continental competitors, the UK belatedly joined the European Economic Community in 1973. In 1976, the plummeting value of the pound forced Jim Callaghan's Labour government to humiliatingly accept a £2.3 billion bailout from the International Monetary Fund, the largest in its three-decade history. Britain became known as "the sick man of Europe". 

Slowly and after much pain, Britain forged a new role for itself. The creation of the European single market – enabling the free movement of goods, capital, services and people between member states – bolstered an increasingly service-driven economy. London, whose population had declined from 8.2 million in 1951 to 6.8 million in 1981, became Europe's financial powerhouse [NS / Wikipedia]. 

Brexit will likely undo all the good that the EU done in helping bolster the UK economy. And as Britain heads for almost certain disaster, the EU President Donald Tusk has expressed his incredulity of how Britain managed to find itself in this position. "I've been wondering what that special place in hell looks like, for those who promoted Brexit, without even a sketch of a plan how to carry it out safely."

So what are the chances of a no-deal Brexit. Despite the warnings and damage already done to the British economy there are quite a number of economists who fear it may well happen.

The risk of a no-deal Brexit still exists as "you can't underestimate the stupidity of politicians," said Pau Morilla-Giner of London & Capital Group Ltd. speaking on Bloomberg TV on Tuesday 5th of February. Essentially the UK is "uninvestable for the moment" he added, "grab the popcorn and see what happens!"

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Thursday, January 31, 2019

Brexit has been a shitshow and a complete clusterf***

Just prior to the last general election, called by Theresa May soon after invoking Article 50, a British satirical political candidate Lord Buckethead made his prediction as to how the whole Brexit process would go. In short it would be chaos.

"Your Prime Minister, your MP, Theresa May, called this election about Brexit," the self-styled Lord Buckethead said, "Have we heard from her what she plans to do about Brexit? No. This is mad. On Thursday, you are going to be faced with Prime Minister May, or Prime Minister Corbyn, against twenty-seven prime ministers from the European Union. It will be a shitshow." [YouTube / YouTube / YouTube]

Given the events of the last two and a half years, the description is more than apt. Lord Buckethead may have only secured a mere 249 votes as he stood against Theresa May in her Maidenhead constituency, but he surely could not have done worse than May in terms of brokering a deal with the EU whilst the chaos of Brexit encircled her and her government.

Having proclaimed she had finally secured a 'deal' with the EU last November, and scheduled a vote for Tuesday 11th December, at the eleventh hour Theresa May cancelled the vote whilst admitting she would have lost by a large margin [Guardian].

In the weeks that followed she attempted to seek further reassurances concerning the so-called backstop from the EU in order to placate hardliners within her party.

But essentially May could provide little to persuade Brexiters and Remainers to back the Withdrawal Agreement. And on 15th January MPs rejected the deal by 230 votes - the largest defeat for a sitting government in history [BBC].

MPs voted by 432 votes to 202 to reject the deal, which sets out the terms of Britain's exit from the EU on 29th March. The defeat emboldened Labour leader Jeremy Corbyn who then tabled a vote of no confidence in the government, which could have triggered a general election. However, May narrowly saw off the bid to remove her government from power, winning a no-confidence vote by 325 to 306 [BBC].

Further political battles came on the 29th January as amendments were put forward and MPs voted against a proposal to delay Brexit in order to prevent the UK leaving without a deal [BBC].

The discussions and debate about the details within the Withdrawal Agreement all seemed rather academic since the EU remained adamant that the Withdrawal Agreement was not up for discussion and that negotiations would not be reopened [Guardian / Guardian].

And with only around 57 days until Britain leaves the EU, May has scheduled a further round of debates set for Valentines Day [FT / Guardian].

Parliament had been due to break up on February 14th and return on February 25th. However the recess is likely to be cancelled as the clock ticks down to what is increasingly looking like a no-deal Brexit should Article 50 not be withdrawn.

With May having kicked the can so far down the road there is no longer time for a so-called people's vote before the default crashing out on March 29th.

And so now there are only three potential scenarios.

The first is that May scares - for fear of a no-deal Brexit - or persuades a majority of the house to back the Withdrawal Agreement. Given the current math, this seems unlikely, and given the EU27 are unlikely to renegotiate, it is unlikely too that hardliners on both sides will budge from their position.

Given that the Withdrawal Agreement is not passed Britain will crash out on the 29th March and fall back to WTO rules. It would have no trade agreements with any country in the world and would have to begin negotiations in order to create trade deals. Of course Britain would still be able to trade but all imports would be subject to tariffs of up to 40% for all exports until trade deals between other countries are struck, which would make Britain's export trade extremely uncompetitive. As regards imports, Britain could unilaterally reduce all tariffs to zero. This would mean that all countries would be on the same level playing field when it came to importing products. But this could result in cheaper and more inferior products ending up on the shelves. Overnight customs and border control will have to apply the same stringent paperwork to all imports while exporters to the EU will also find themselves having to fill in paperwork where they were previously not required to do.

But falling out on WTO rules is only half the story. Britain will have to replicate and sign up to 750 treaties that will lapse as it leaves the EU. These cover many things including regulations on medicines, airlines, agricultural standards, safety standards and so on [Out-LawFT].

Britain would of course have to prioritise which treaties were more important than others. Getting regulations and treaties signed that relates to airlines would be one of the first. But it will be no small task sifting through the mountain of legalese and getting countries to agree and sign.

The third scenario is that May "bottles it" at the eleventh hour and cancels Brexit by withdrawing Article 50.

Whilst the risks of a no-deal Brexit are dismissed by hardline Tories within the ERG as project fear, most economists and most politicians believe Britain's crashing out of the EU could be devastating for the economy.

The government has set out plans for the army and police to man the streets following a no-deal outcome in order to prevent food riots and to maintain order. But the same security preparations might also be put in place should May revoke Article 50.

Whilst a revocation might save the country from itself, the far-right and extreme Brexit supporters could exploit such a situation and cause civil unrest.

Given the so-called deal is unlikely to be passed there is only a hard no-deal Brexit or no Brexit. Either option will likely precipitate civil disturbances and riots, though the repercussions of a no-deal Brexit are likely to last much longer.

Lord Buckethead's suggestion that Brexit negotiations would be a "shitshow" nailed it. As regards the outcome it can perhaps only be described as a complete clusterfuck. One could say it was an omnishambles, but that really doesn't quite impart the absolutely disastrous mess that the whole Brexit fiasco has been.


tvnewswatch, London UK


Thursday 31/01/2019

Wednesday, December 19, 2018

100 days 'til Brexit, but will parliament "bottle it"?

With 100 days to go and with the 'meaningful vote' on Theresa May's 'deal', or EU Withdrawal Agreement, postponed until mid January, Brexit has now come down to a game of bluff and threats.

Theresa May and her cabinet have begun plans for a no-deal Brexit and in so doing is essentially threatening parliament to vote for her deal or crash out of the EU and fall back on WTO rules.

Some have called it a game of chicken, but it could also be regarded as a form of blackmail.

With the government appearing to be serious in following through with a no-deal Brexit should it lose the vote on May's deal organisations representing hundreds of thousands of firms have expressed concern saying a no-deal would bring "severe dislocation and disruption".

"Businesses have been watching in horror as politicians have focused on factional disputes rather than practical steps that business needs to move forward," a statement from the CBI [British Chambers of Commerce], Institute of Directors, Federation of Small Businesses and the EEF, the manufacturers' organisation, said [Sky News].

Amongst many employers there is a concern that much needed immigrant worker will refrain from coming to the UK [Guardian / BBC].

The government have said they have ramped up contingency plans putting aside £2 billion of public money [Gov.uk], putting troops on standby [CNN] and buying up refrigerators to stockpile medicine [iNews / Guardian].

Whilst the likes of Iain Duncan Smith and Jacob Rees-Mogg insist a no-deal is of little concern, there is a general consensus that a no-deal Brexit would be a painful experience [Politico / Guardian / NBC].

Even with the slightly softer approach offered by the EU as it published updated preparedness and contingency plans, a no-deal will still create significant problems and will only defer much of the chaos for months [Europa / BBC / FT].

Given May's deal is rejected, there are a few that believe that Brexit is dead. Some feel that a voting down of Theresa May's deal will force a so-called People's Vote. This could still go either way and there is a fear amongst some that the whole Brexit shambles could become an intractable political hot potato.

But while there are only a few expressing such a view, there is a feeling that the Tory government and parliament may "bottle it" and retract Article 50 as at least one commentator has speculated might happen [Twitter].

May's slogans of Brexit Means Brexit, No Deal is Better Than a Bad Deal and What We Want is a Red, White & Blue Brexit all seem rather hollow after more than 600 days since the EU referendum. With 100 days to go until Brexit day and only a little over 70 days when parliament is likely to vote down May's 'deal' there may be a reality check within May's cabinet.

Will May really want to own a hard Brexit with all the economic fallout that it would bring with it?

The next general election in the United Kingdom is scheduled to be held on 5th May 2022 under the Fixed-term Parliaments Act 2011. Thus the Tory government would have a breathing space to bridge the divides and tackle the anger that would likely arise from the hardcore eurosceptics if it did abandon Brexit.

The Tory party's main concern is about retaining power. Should they follow through with a no-deal, the chaos that will follow is very likely to result in the Tory party falling in 2022. Indeed it might even face a vote of confidence before then should things go very badly.

If, on the other hand, it seizes the moment and rescinds Article 50, there is a chance it could ride the storm and maintain support. May is set to step down before 2022 thus putting into place a new leader which could, potentially, allow the party to rebuild and make itself re-electable.

There is no guarantee any of this will happen, but the odds are certainly going up that Brexit may not happen at all [Atlantic Council / Mirror] .

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Tuesday, December 18, 2018

UK government plans for no-deal Brexit

There seems to be no model put forward by any economist that shows Britain will be better off after Brexit. Indeed every forecast, whilst numbers vary, show Britain will be poorer under every type of Brexit compared with staying in the EU.

Yet Theresa May continues on her course to deliver Brexit, saying that not to do so would be a betrayal of the people. And with her deal secured with the EU all but dead it appears she is planning for a no-deal Brexit.

Last month both the the Chancellor of the Exchequer Philip Hammond and the Bank of England's Mark Carney both warned on the catastrophic risks of a no-deal Brexit. But much of the media and quite a number of politicians seem to be dismissing such predictions as a re-run of so-called 'project fear'.

According to the Chancellor of the Exchequer Philip Hammond all forms of Brexit would make the UK worse off but Theresa May's plan was the least damaging option.

Analysis of the prime minister's Brexit deal shows the economy will be "slightly smaller", he told BBC Radio 4's Today programme on Wednesday 28th November 2018.

But it was not just about the economy, he argued, and her plan would deliver "political benefits" as well.

His comments came as the government was due to publish its economic analysis on the long-term effects of Brexit on the UK.

The Treasury was to set out various scenarios - with the Daily Telegraph saying it would predict £150bn in lost output over 15 years under no deal, with Theresa May's plan costing £40bn [BBC / Sky News / City AM].

Speaking on another radio station the chancellor said, "Remaining in the EU leaves the economy slightly larger."

David Henig, Director of the UK Trade Policy Project and a leading expert on the development of UK Trade Policy post Brexit, speaking on LBC radio said government forecasts concerning the UK economy, should it accept Theresa May's deal, amounted to mere "aspirations" since the deal was only a divorce agreement and no trade deals have yet to be negotiated and signed.

Indeed even the so-called transition period that the Withdrawal Agreement allows would be unlikely to give the UK enough time to strike enough required trade deals to mitigate a significant economic decline.

There will throughout the transition period be yet more uncertainty during which more business may well leave the UK.

A no deal scenario could however be much, much worse. Echoing what Hammond had said earlier in the day the Bank of England's Mark Carney later held a press conference which painted a very bleak picture should the UK crash out.

A no deal Brexit could send the pound plunging and trigger a worse recession than the financial crisis, the Bank of England warned.

It said the UK economy could shrink by 8% in the immediate aftermath if there was no transition period, while house prices could fall by almost a third.

The Bank of England also warned the pound could fall by a quarter [BBCSky News / Metro].

The warnings came only days before parliament was due to vote on the Withdrawal Agreement secured with the EU27. But only hours before that vote Theresa May cancelled the vote sending the pound to its lowest level in more than 18 months [Guardian].

As well as creating economic uncertainty the move angered many MPs. Labour's Jeremy Corbyn, who accused Mrs May of "losing control of events" and "disregarding" MPs, was granted an emergency debate in the Commons on Tuesday while Commons Speaker John Bercow said the government's handling of the issue had been "regrettable" [BBC]. 

Having failed to obtain any changes to her deal from the EU Theresa May then faced a confidence vote after the 1922 committee received the required 48 letters. May survived as nearly two thirds of her party backed her. But May's battles are far from over.

There still essentially remain only three options. Theresa May's 'deal', no-deal or no Brexit.

But with May continually dismissing a People's Vote or the rescinding of Article 50 only her 'deal' or a cliff-edge no-deal Brexit seems to be the only options on the table.

The situation ramped up further a week after May cancelled the meaningful vote as she gathered together cabinet members to discuss plans for a no-deal Brexit [BBC].

The official position from the government is that a no-deal Brexit was not preferable to May's 'deal', but that it would "be irresponsible" not to plan for such an eventuality.

"The government's priority is to secure a deal," the Brexit secretary Stephen Barclay told Sky News. But, he added, there were plans being made for a no-deal.

With 14 weeks to go the Brexit secretary Stephen Barclay said businesses needed to prepare for a no-deal and read the preparedness notices the government had published.

Andrea Leadsom reiterated his comments saying a no-deal was a distinct possibility. Asked if a no-deal might happen she responded by saying, "it certainly is, if all else fails."

But not everyone is happy with the contingency plans. David Gauke has reportedly described a managed no-deal as a "unicorn that needs to be slaughtered" [Sky News]. It has already been reported that the justice secretary could resign from his cabinet position if Theresa May's government seeks a no-deal [FT]. Others too have been outspoken about a no-deal option. Amber Rudd has made it clear she won't accept a no-deal, telling Cabinet, "Just because you put a seat belt on, it doesn't mean you should crash the car"

The cost of preparing for a no-deal is reportedly around £2 billion [Business Insider].

But the real cost to the UK economy, 'managed' or otherwise could be far more costly. And with no help form the EU, a no-deal Brexit will be far from managed [Bloomberg].

The contingency plans being made may be too little too late to mitigate the disaster that would happen should Britain crash out. There will more than 750 treaties currently signed with the EU that will cease to apply which cover everything from trade to rules on medicines and flights. Fourteen weeks is simply not enough time to rework, negotiate and sign such a large amount of treaties, many of which are not covered by WTO rules.

Theresa May could be attempting a game of bluff, essentially blackmailing MPs to sign up to her 'deal' under the threat that the only alternative would be a no-deal Brexit.

Given the damage that a no-deal Brexit could do, many MPs might feel obliged to sign up to May's deal. But there are many MP's who could play the same game and force May into calling a people's vote should her deal fail to pass.

As the cabinet gathered today there were only 101 days until Brexit day.  The Prime Minister has announced that it will instead be held in the week beginning on the 14th January. That will leave only 74 days before Britain would be due to leave the EU.

All signs are that May's deal is set to fail. And with only 10 weeks to go there would be little time to have a second referendum or people's vote unless the EU offered an extension to Article 50.

In such circumstances it is possible and even likely that Britain will crash out. And while the government says they are preparing for such an eventuality, no-one is truly prepared for the chaos that will ensue.

There will be those who will say the predicted chaos is merely scaremongering. But this seems to completely ignore a huge number of preparedness notices issued by both the EU and Britain.

tvnewswatch, London, UK