Finance: Research, Policy and Anecdotes

The first three months after the end of the transition period have passed and we have moved from speculations about the effects of Brexit to the reality of Brexit. What were supposed to be teething problems turned out to be new structural barriers; every week brings a new sector in the UK that finds itself shut out of the Single Market due to non-tariff barriers. British ‘ex-pats’ who had not bothered to get their residence status sorted in time in Spain are complaining that they have to leave the country and the Brexit press is predicting the permanent economic decline of Spain because of their exodus (as, before Brexit, they predicted the permanent decline of the UK because of the inflow of Europeans).

All of this has made it again clear that Brexit will never end and that the Brexit movement has gone fully Trumpian, nourishing a permanent victimhood culture.  Or as Chris Grey nicely summarised it in his blog a few weeks ago: “The country, as represented by Frost, seems increasingly like a stroppy, entitled teenager who has stormed out of the family home in a tantrum and now endlessly complains that his awful parents are disrespecting him. ‘Not only are they no longer housing me,’ he whines, ‘but they are insisting I clear my stuff out just because I promised to when I left. And I’m stuck with paying the rent on my new place because they won’t help me out any more. Don’t they realise I’m an adult now?”   Until the end of 2020, it was all about escaping the EU, now it is all about blaming the EU for the (predicted) consequences of Brexit.

Only a few months ago, the UK government insisted on getting a trade deal with the EU like Canada and Japan have it, insisting that it wants to be treated like any other third country. Now, that the consequences have become clear (in the form of non-trade barriers), they insist that the EU should treat the UK differently, given the geographic proximity and close economic integration. But of course, the government and the Brexit press is not about to take responsibility for what a few months ago they claimed to be the greatest trade deal and Brexit win ever.  Rather, what was once billed Project Fear is now declared Project Revenge by the EU. 

The issue that promises to provide most fuel for conflict is the Northern Ireland Protocol, which effectively introduces an economic sea border in the Irish channel in order to avoid a land border between the Republic and Northern Ireland. The UK government agreed to this in the Withdrawal Agreement (even though it tries to disown it now) and it is the direct consequence of the Brexit Trilemma; leaving the EU Customs Union and Single Market requires establishing border controls somewhere! But it has raised the temperature in Northern Irish politics, with unionists feeling abandoned by the British government and the Tory party. It is certainly a sensitive situation and only cooperative behaviour from all sides (UK, EU and Irish government) will avoid these tensions to become worse.  It does not look promising, though given the low trust in the UK government by other parties and its confrontational approach.

The relationship with the EU will stay central in UK politics for decades to come (though not necessarily the other way around!).  The current government has taken a confrontational approach, under the leadership of an unelected bureaucrat (how ironic!)– David Frost. This will obviously inflict further economic damage on the UK and further undermine its international standing. An alternative approach would be to behave like grown-up adults, take responsibility for the results of the Brexit this government has chosen and try to smooth relationships with the EU.  However, this is a hope that I do not have as long as this Prime Minister and this party is in power.  But even with Labour in power, the UK-EU relationship will be a difficult one; the main challenge for the UK political class will be to move beyond the culture of victimhood, acknowledge that the Brexit campaign promises were false and there are no benefits to be had, and approach the future relationship with the EU with a realistic and constructive mindset.  If one looks at the infighting within the Republican party in the US about a post-Trump future, one cannot be that hopeful that this will happen anytime soon.

Overview