For UK’s Brexit future, it’s not the economy. It’s the politics, stupid
Brexit means Brexit, the British Prime Minister Theresa May said early on in her premiership. Everything she has done since last summer has hammered that message home: Brexit means a British withdrawal from the EU and she means to see it through, regardless of whether it is “hard,” “soft” or somewhere in between. The likelihood, with each passing week in UK politics, is increasingly the former.
The vote in Parliament last week to trigger Article 50 of the Treaty on European Union means that from next month the clock will start ticking and by early 2019 the UK will be out of the EU, seemingly forever.
The intervention of Tony Blair in the debate underlines the hope of some in British politics that the Article 50 process is not irrevocable. Their numbers may be swelled as circumstances change over the next two years. But the frosty, cynical reception given to the former leader’s speech just shows what an uphill battle it will be to get that point of view across.
The Remainers’ hope is that economic reality will kick in to convince people that what they voted for last summer has such dire consequences for their material livelihoods that they will be persuaded to reverse their referendum decision, in some kind of final ratification vote on the Brexit negotiations, still to be determined.
There are two big problems with that line of thinking. First, Brexit voters had the negative economic repercussions of a “leave” vote spelled out in dramatic fashion before the referendum and it made no difference to them.
The Bank of England (BoE), International Monetary Fund (IMF), the upper echelons of UK big business, the global elite of investment bankers and financiers, all these made pessimistic pronouncements for the UK economy post-Brexit: The pound would plummet, property prices would collapse, exports would grind to a halt, investment would dry up and the City of London would be turned into a wasteland where wild animals roamed and tumbleweed blew along deserted streets.
Doom forecasts did not come to pass
None of this mattered to the Brexiters, because as we now know from the exhaustive analyses of the shock result, most UK citizens were not influenced by the economic arguments at all. What they ultimately cared about was freedom of labor within the EU, which is the acceptable euphemism for “them coming over and stealing our jobs.”
The other problem with the Blair school of thought is, simply, that the doom-laden forecasts have not come to pass. Sure, sterling fell to a three-decade low against the US dollar in October, but has recovered somewhat since, and the depreciation against the euro has not been so dramatic.
The vote to leave the EU has exposed deep fault-lines in society, and a deficit of political talent.
Exports have actually increased and while there have been some property price falls it is not the carnage many forecast. The economy is still growing, and the BoE, IMF and others have had to eat humble pie and edge their forecasts upward.
All this does not mean that the Brexit slump will not happen. Maybe the economic effects have not been so severe because, bluntly, Brexit has not happened yet. But it does tell a less negative story of Britain’s long-term economic prospects.
I have written before in this column that the UK faces a tough struggle if it is to reinvent itself as the “workshop of the world” after Brexit, replacing lost EU trade with new trading partners in the US, Asia and the Arabian Gulf. At best, that can only replace some of the lost business.
But trade is not all about manufactured goods any more, and I think the UK stands a good chance of retaining and even expanding its global share of financial and other services after Brexit.
The unique skill of the City of London over centuries has been to give the rest of the world what it wants, and I have no doubt it can do that again, in the process seeing off the challenges from second-rate financial centers like Frankfurt, Paris and Milan.
Deep political fault-lines
Britain’s economic prospects post-Brexit certainly could not be described as rosy, but there is no reason why, given a fair wind and good judgment, the plucky Brits should not make a good fist of it.
The real challenge lies in the political arena. The Brexit result has exposed deep fault-lines in the United Kingdom’s political system and a deficit of political talent.
The two-party system has been found wanting, with no viable alternative to May’s Brexit-committed path. The Labour Party’s all-consuming obsession with ideological purity has meant it is simply unfit to be Her Majesty’s Most Loyal Opposition.
And by the time Brexit becomes a reality, Scotland could have its own government and there is serious risk of a revival of vicious sectarian conflict in Northern Ireland. The union is creaking to near-break point. Britain may scramble through its post-Brexit economic legacy. The damage to British politics and society is likely to be much longer-lasting and much more serious.
• Frank Kane is an award-winning business journalist based in Dubai. He can be reached on Twitter @frankkanedubai