Making sense of trends and data

New Year, new peak across the pond at Brexit

Published 1.9.2017
Britain's withdrawal from the European Union will have an immense effect on the global economy. Precisely how it will affect the global economy is unknown and unknowable, but that does not stop analysts and pundits from making predictions— LWRAS included. This is the first installment of 2017 regarding the status of Brexit.

This morning's news brought more evidence that all those proclaiming that the evidence is in and Brexit effects won’t be negative are talking out of their bung holes. No one knows how Brexit will affect anything, because British Prime Minister (PM) Theresa May has been very vague to date about what she means. As she becomes more clear in her intentions, as she must in time, then the effects will be known.

Though in fact, all this article indicates is that when she said “hard Brexit,” she meant it. She wants to negotiate a deal where the Brits keep control of their borders, but still have an agreement with the European Union (EU)— not individual countries. The appeal for Britain is obvious, but it’s precisely the outcome the EU has indicated it won’t accept.

This is the current situation. May’s position, to the extent it is known, is what it was in October 2016. Later, possibly in response to the British pound’s plunge, a spokeswoman said that May has not ruled anything out. But clearly her position has not changed.

The Norwegian PM doesn’t think May has what it takes to negotiate with international entities. She see a “very hard Brexit.” In part because neither May nor Britain has had to negotiate since being in the EU.

In a move that highlighted tensions at the heart of the British government over how to handle Brexit, Britain's ambassador to the EU, Ivan Rogers, resigned this week. In his letter of resignation he also referred to a lack of negotiating experience within the British civil service.

Not everyone thinks Brexit process is going poorly. So far the effects of Brexit have been minimal. The scare mongering by the Bremain side during the campaign were clearly overstated. However, the process hasn’t even begun yet.

Stock markets tend to fluctuate. When the world didn’t end, they recovered. But again, still early days and some may have convinced themselves that it is not going to happen, or that it won’t happen for years. Business investment and employment has slowed. The pound is worth less against the dollar— but the excuse for that is that the pound had been over-valued. Not sure Brits that actually have to buy things would think that. Such as Jamie Oliver, whose restaurants are based on ingredients from Italy. Ah well, those employees should have found work with a chef using British ingredients.

London property values, that had been inflating are now falling, though they are said to have been overpriced and due for correction. Inflation is still a worry, but so far the effect isn’t seen. Again, nothing’s really happened yet. Wait until Article 50 is invoked and Brexit occurs.

Mainstream political parties, having for long failed to heed the calls of those being left behind, are being pushed aside by charlatans.

The Brexit vote was a cry of despair by the poorly educated and those employed in dead-end jobs; many such Brexiters have reason to fear that their children will do even worse than them.

May is catching flak for her leadership style. That’s not surprising .She rose to power suddenly. She’s a woman (Maggie Thatcher caught flak too) and she doesn’t have a plan for Brexit. She was technically in the Bremain camp, but wasn’t an ardent supporter. Bloomberg cites anonymous sources in the government who say that the honeymoon is over. They claim she has centralized power more than Cameron did. May’s side refutes it all of course.

Six months on from the referendum, the question remains as to what shape the split will take. According to a new report by a group of academics, the answer is a hard break in which the U.K. surrenders most of its existing economic and trade ties in return for securing control of immigration as well as most of its money and laws.

May has said “hard Brexit” not sure why anyone doubts this will be the case. There’s no evidence that Brits have changed their minds on Brexit. The United Kingdom (UK) economy grew .6% in the third quarter, .1% more than the second.

Still, the current-account deficit, which the Bank of England has highlighted as a risk particularly if Brexit deters foreign investment, widened. The deficit amounted to 5.2 percent of GDP, as the trade gap swelled to the widest in almost three years.

Consumer sentiment is declining too. Investors may not believe that a “hard” Brexit will happen.

In her end of the year message, May vowed to unite the country and forge a “bold new role” for the UK in the world. Britain is as divided as the US is, but unlike Trump, May understands that and knows she needs to reach out to both sides.

Profiling May?

The Economist profiles May. May wen to the school and programs that typically turn out Tory pols. But her course of study was a bit atypical.

Yet various things distinguished her from the classic Tory hack. For one, she did not read philosophy, politics and economics (PPE), the course designed to train future elites. She read geography. For David Willetts, who was minister for universities in the 2010-15 coalition government in which Mrs May was home secretary, this distinction is more than incidental.

The claim is that those who go the PPE route believe in the myth of Britain, and that it will trickle down to other. May cares about places and tradition, and so cares more about the people there. If true, that would fit the Brexit prescription. She’s also talking about bringing back manufacturing, which is popular with Brexit voters.

No one knows what she will do or how she will do because she never had to run for election and tell the voters. She’s made some bold pronouncements, but hasn’t followed through. She’s been on the left of her party, warning them that they were leaving people behind.

Mrs May patently stands apart from many of her colleagues in ways that go beyond this reformism; there is a social distance, too. Some say it has to do with the isolating shock of losing both of her parents when she was relatively young. Others cite her experience of diabetes—the prime minister must inject herself with insulin several times a day. But the best explanation is her career as a woman educated at a provincial grammar-school (the granddaughter of domestic servants, no less) in a party dominated by public-school boys given to cavalier confidence and clever-clever plans. When her allies praise Mrs May’s methodical style and her disdain for chummy, informal “sofa government”, they are channelling her long-held exasperation with the know-it-all posh boys—particularly Mr Cameron and George Osborne, his chancellor.

May does not do the socializing thing. She runs a more centralized office, just as she did at the Home Office. She is also a canny politician.

Having for the most part distributed ministerial portfolios evenly between Leavers and Remainers, Mrs May appointed three people who, unlike her, campaigned for Brexit to the departments most concerned with bringing it about—Mr Johnson to the Foreign Office, Liam Fox to a new Department for International Trade and David Davis to a new Department for Exiting the EU. Giving the Brexit-related jobs to paid-up Brexiteers insulates her from criticisms of not supporting the policy. It also cannily reduces the chance of a single Brexiteer emerging as a rival if the process’s outcome disappoints the diehard Leavers.

She allows open discussion in her cabinet and truly listens. this has not always been the case. But she is a bit of a control freak, which has slowed some projects and goals down.

Comments by ministers have been disowned, the Treasury feels sidelined, diplomats believe they are ignored. When a consultant’s memo to the Cabinet Office criticising Mrs May’s leadership style leaked, the prime minister reportedly demanded that Deloitte, the firm in question, be “punished”. It has since withdraw from a series of bids for government contracts, and ministers’ e-mails and phone records are to be seized to prevent further leaks. Even the queen has reportedly grumbled about Mrs May’s slogan-heavy furtiveness about how Britain will leave the EU.

This reaction seems "Trumpian." May keeps saying, “Brexit means Brexit,” which means nothing. She also says that it will be “red white and blue,” meaning patriotic. They assert that her need to control things is why she’s fighting the legal battle to avoid a Parliament vote on Article 50.

On January 3rd, Sir Ivan Rogers, ambassador to the EU quit 10 months before his term was up. He’s not the only senior civil servant to quit. However, Labour is a complete mess, so there will not be any challenge to May from that direction. May gets defensive when challenged, and she only wants to make deals with people she likes. That description offered by The Economist also sounds Trumpian. And it’s a poor way to govern.

May doesn’t know how to be funny either, and has apparently made an enemy of Boris by mocking him— after putting him the position. May needs to adapt, or by 2018 or 2019 Britain will be a disaster.


Related LWRAS analysis:

Search this site:

This website uses cookies to ensure you get the best experience on our website. Learn more.