In recent posts I’ve been using the analogy of a slow puncture for the damage caused by Brexit with the political consequences being muffled as a result. An excellent piece by Rafael Behr this week makes an essentially similar argument: “Brexit is an unspectacular failure” and this precludes “a realistic conversation about the relationship that Britain should have with the rest of Europe”.
However, several people have pointed out that a slow puncture eventually leads to a flat tyre which can’t be ignored. We’re not at that point yet, but there are glimmers of a realization that there is a serious problem and, just in the last week or so, these glimmers have been growing. Even if so, it’s coming far too slowly, especially given the still more serious problems which lie ahead. In particular, for all that a little more realism about Brexit may be emerging, there is still insufficient truthfulness about it.
The reality of supply chain disruptions
Like many others, I am increasingly noticing failures in food supplies. My local supermarket has many gaps on the shelves and has signs and announcements apologizing for ‘current supply difficulties’. My milkman (yes, they still exist) has not delivered anything for a week, citing the same reason. Such personal experience probably has more impact on the public than media images of empty shelves and stories of shortages, with McDonald’s running out of milkshakes being this week’s highest profile example. Shortages in food supplies are the most visible, and potentially most politically important because they impact on people’s daily lives, but there are similar problems across the board (£), perhaps most importantly in the construction industry.
As the cliché has it, the plural of anecdote is not data, and it is very hard to pin down exactly how extensive and serious these problems are. But the latest PMI (Purchasing Managers’ Index) survey released this week shows “the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen previously in more than 20 years of survey history”. Meanwhile the Chief Executive of the Co-op Group says (£) that “shortages are at a worse level than at any time” he has seen, and there has been a dramatic fall this year in levels of stock held by UK firms which have reached a record low.
We also know that the Road Haulage Association estimates that the UK is in need of up to 100,000 HGV drivers, which is one of the key causes of the supply difficulties. This in turn is part of a wider shortage of labour in all parts of the economy, from farming through to retail and hospitality, as well as in social care and many other sectors. Overall, it doesn’t seem hyperbolic to say that there is now a supply crisis which is likely to worsen, and if that were to lead to widespread panic buying that could lead to a political crisis.
Equally, it is difficult to separate out Brexit from other causes, especially the pandemic, and some of the current supply problems are unquestionably global. But we can say with certainty that Brexit is one of these causes, that some companies and trade bodies say that for them it is the main cause, and that where supply problems are to do with post-Brexit trade barriers with the EU they are, by definition, entirely caused by Brexit. That the exact extent of the role played by Brexit in some of this is hard to determine offers Brexiters a chance to downplay it, as in the case of the HGV driver shortage, but doing so misses the key point: whilst, along with other countries, the UK faces supply chain problems beyond its control, the UK, uniquely, has chosen to add to them.
It’s official: this is what we chose
As regards the HGV driver shortage specifically, the government response is instructive. Back in June ministers dismissed industry concerns as “crying wolf”, implying it was all more Project Fear. Now that the realities are undeniable and facing calls to grant temporary work visas for EU drivers, a spokesperson said:
“The British people repeatedly voted to end free movement and take back control of our immigration system and employers should invest in our domestic workforce instead of relying on labour from abroad.”
So the government itself is explicitly tying driver, and hence in part supply, shortages to the delivery of Brexit: it is, so to speak, ‘the will of the people’. Yet it is an odd statement. For one thing, there has never been a vote on the issue of free movement, per se. Moreover, the government are not being asked to re-instate freedom of movement but, precisely, to exert control over the immigration system. Control does not necessarily mean restriction.
This goes to the heart of one of the inherent contradictions within Brexit, but glossed over by Brexiters. Many ‘globalist’ Brexiters claimed (usually after the referendum) that a key advantage of leaving the EU would be the freedom to design an immigration system in line with British needs, rather than to end immigration. For them, overall immigration might even increase after Brexit. Other, more ‘nativist’, Brexiters did indeed see it, and sell it to voters, as a way of reducing immigration across the board.
Apparently, the latter view holds sway with the government, although a U-turn is perfectly possible and even likely. But it is based, as the statement shows, on the idea that domestic labour can be a substitute (just as, more widely, Brexiters like John Redwood think that domestic production can substitute for imports). As such, it is a fantasy because of the UK’s ageing population and because prior to Brexit there was arguably full employment, or something close to it (depending on definition).
HGV drivers could be paid more, but if that solved the problem in one part of the labour market it would displace it to another. Or all workers could be paid more, though their gains would arguably then be eaten up by inflation as workers are also consumers. But this won’t solve the overall domestic labour shortage. Training could change the skill profile of the domestic workforce, but won’t increase its size. Pensioners won’t, and for the most part couldn’t, harvest the crops. And the limitations of the idea that the unemployed can shift to significantly meet labour needs are tacitly acknowledged by the latest attempt to fill the gaps by using prisoners on day release (£). Increased mechanization may be a partial solution in some sectors, but is currently of limited use for, say, HGV drivers or social care. Not for the first time in history, Britain needs immigration for economic reasons alone.
Freedom of movement of people was actually a very efficient and flexible way of addressing this, as well as having all sorts of other, non-economic, benefits. For that matter, it can’t be assumed that if the government did introduce temporary visas for EU drivers they would flock to come to work here. The hostility EU workers have experienced, the fall of the value of the pound since the referendum, the changing economic situation of many EU countries, the miserable treatment of EU truck drivers in the UK and many other reasons might mitigate against that.
Choices have consequences
With all that said, the government’s (current) stance on HGV drivers is an important one in that it asserts and acknowledges that some of what is happening is a matter of the collective choices made by the UK: by the vote to leave the EU and the way that the Brexit government has interpreted that vote. And although I can’t be sure, my impression is that even in the last week there has been a growing willingness in media reports to link labour and supply shortages to Brexit. For example, the Mail report on using prisoners to fill labour shortages named both Brexit and the pandemic in the headline.
Against that, many reports in the pro-Brexit press continue to be in denial. A peculiar piece in the Mail on Sunday claimed to have undertaken an “investigation” that enabled it to “reveal” extensive and costly barriers to trade since the end of the transition period. That is hardly the triumph of investigative journalism it purported to be, but more importantly nowhere was it acknowledged that these things are a consequence of the UK’s choice to undertake hard Brexit, and the headline reference to “the EU border blockade” implied, as usual, that something unfair or punitive had been done to the UK by the EU. Similarly, the Express this week, also reporting on the barriers facing exporters to the EU, identified the need for “urgent talks” to reduce the checks that were being “forced” on British firms by the EU, as if these checks were not the result of the form of Brexit the UK chose and the Express itself vociferously supported.
Again this goes deep into the Brexit process, in several ways. First, it reflects the refusal to understand or to admit that Brexit would have costs, and that the harder the Brexit the higher the costs. So when these were warned of it was dismissed as Project Fear, and as they emerge they are ascribed to EU punishment. For that matter, even now Brexiters seem unable to decide whether talk of Brexit damage to trade is a remainer invention or, as in the two reports just discussed, an EU plot. Secondly, and more deeply, it continues the longstanding pattern whereby Brexiters behave as if Britain had been forced to leave the EU rather than choosing to do so. It is the failure to be honest about the choices Brexit entailed which remains crucial.
It’s important to understand why this matters so much. An illuminating report by Sarah O’Connor in the FT this week (£) discusses the truck driver shortages, and the many issues that lie behind that and other labour shortages, and argues that “to use them to bicker about Brexit” or to suggest that “everything was fine without [Brexit]” is to miss their complexity. That’s reasonable enough in itself, but it doesn’t mean that their relationship to Brexit can be ignored. Until there is a widespread honesty about what having chosen Brexit means – as well, certainly, as what it doesn’t mean - we are stuck in the same old loops of Brexiter denial and obfuscation.
For particular example, what kind of ‘re-negotiation’ with the EU is envisaged in these ‘urgent talks’ in order to remove the border checks? It is totally pointless to disinter the old lies about how the UK can be outside the single market and customs union and yet treated the same as if it were not. We can’t, as a country, be realistic about Brexit until we start being truthful about Brexit.
Truthfulness is more than realism
In my previous post, I suggested that, under the radar, there are a few signs of realism, and this week has seen a further, and very important, example. The government has announced it will postpone the requirement for goods sold in the UK to carry the UKCA mark, and therefore extend the validity of the CE mark in the UK, from January 2022 until January 2023. This issue (again, discussed in more detail in an earlier post) epitomises many of the Brexit debates in that it imposes extra costs on firms, whether British or not, wanting to sell their goods here. But it does so for very little substantive reason since for the most part product standards remain unchanged, so its only justification is a purely theoretical idea of sovereignty (£). It is also an example of how the government seriously underestimated the complexity of what it and businesses would have to do and how long it would take.
So it’s sensible to postpone. But it would be even more sensible to recognize its pointlessness. We might as well postpone indefinitely and, if we did, absolutely nothing bad would happen. And if we recognized that, then, in the end, the same thing could be said of the pointlessness of not trying (it wouldn’t be easy or automatic or quick) to re-enter the single market via EFTA or, at the very least, to have as close a relationship as possible with it, rather than stick to the sovereignty-first approach that led to the Trade and Cooperation Agreement. That would mean, for example, accepting the EU offer of dynamic alignment on sanitary and phyto-sanitary regulations, which as well as resolving many of the Northern Ireland Protocol (NIP) issues would ease border frictions all round. It would also mean dropping the latest fantasies of data protection divergence (£).
From this point of view, whilst it is indeed sensible to postpone UKCA, we shouldn’t feel any ‘gratitude’ to the government for doing so (though businesses affected will feel relief). It’s actually all of a piece with what has happened with Brexit from the very beginning: Brexiters in and outside government have refused to accept reality until the point that it becomes impossible to do otherwise. Then, they either accept it with bad grace (the financial settlement of the Withdrawal Agreement being an example) or postpone the difficulties if they can (as in this UKCA case, or the Northern Ireland grace periods). What is lacking is any truthfulness about why reality keeps trumping the promises and plans of the Brexiters.
In this sense, there is a realism but no honesty in quietly postponing UKCA. The government is avoiding adding to the already visible supply chain disruptions (because, literally, no goods requiring such marking would have been legal in the UK from January without it). Since, to most, it’s an arcane technical issue they’ve never heard of, this postponement also avoids political discussion of Johnson’s approach to Brexit. So it slows the puncture. The same applies if there is a reversal of the policy on HGV driver visas.
It’s not hard, now, to imagine a further postponement to the introduction of import controls that are due to start on 1 October, for exactly the same reasons, but again without any honest acknowledgement of the failure to tell the truth of what hard Brexit meant for borders from the outset, and consequently to prepare for it in time. If so, unlike UKCA postponement, it will carry risks because in leaving the border relatively unchecked the risk of smuggled or even dangerous goods entering the UK market grows.
Post-Brexit Britain needs a new truthfulness - urgently
In short, it simply isn’t enough for the realism to be quiet and under the radar, especially whilst – as is likely to resume shortly – engaging in the antagonistic posturing over the NIP that precludes close and harmonious relations with the EU. What’s needed is an open public and political debate not so much about Brexit, though that is part of it, but about Britain’s post-Brexit future and relationship with the EU. That isn’t, and can’t be, a re-hash of the 2016 referendum, as it can’t be conducted in the terms of the now dead question of EU membership, and so it mustn’t be conducted in terms framed by the Brexiters which, by definition, arise from that dead question.
This is highly unlikely to happen, but it’s just possible it might be provoked if not by the supply chain crisis then by geo-politics. That is, the shock of the Afghanistan pull-out (£) could be the spur to the government realising that it needs to rebuild its relationship with the EU - a sharp puncture to the vanity of Brexit, so to speak. (See also the ‘noisy fantasy’ section of my post last week.)
It certainly seems likely to hasten the EU’s already growing drive for ‘strategic autonomy’ which will, in turn, create new pressures upon the UK to work with rather than independently of, or even against, the EU. This is partly about security and defence issues, but also the wider set of ways in which the EU might develop a greater degree of – oh, the irony – sovereignty. These encompass emergent ideas about EU technological sovereignty and the closely related initiatives to secure sustainable access to ‘critical raw materials’, including the European Raw Material Alliance which was established late last year. This has recently led, for example, to a strategic partnership between the EU and Ukraine over such raw materials, which include the rare chemical elements and minerals needed for new battery technologies and other key, especially green, industries of the future.
The UK has a similar interest – mainly driven by a need to diversify from reliance on Chinese suppliers – and might benefit from involvement in such developments. The same applies to ongoing developments in both EU and UK hydrogen strategy. But any such involvement can’t currently be separated from the omnipresent issue of the NIP disputes and all the other spats, or the constant whining about the EU punishing the UK for its own choices. In turn, it can’t be separated from over-arching issues of Brexiter hubris about ‘Global Britain’ and sovereignty, and visceral hostility to the EU and fantasies of its imminent collapse or, alternatively, its overweening potency. That is all dead wood which needs, very urgently, to be discarded.
These are enormous issues, encompassing the climate crisis, the economy, war, peace and diplomacy - and they are all intertwined. So, as with Brexit, Britain has choices and those choices have consequences. The refusal or inability of the current government, and the pro-Brexit media, to engage seriously with them, which necessarily includes engaging seriously with the EU, instead of an imaginary independence and a fantasy of its global role is shaping up to be a massive strategic failure. It isn’t automatically entailed by Brexit, but it is an outgrowth of applying Brexiter logic to the post-Brexit world. More precisely it is an outgrowth of the dishonesty of that logic, of the lack of truthfulness which precludes realism.
Empty shelves in the shops are only the first payment of the costs for that lack of truthfulness.
Friday, 27 August 2021
Friday, 20 August 2021
Living with Brexit
In my previous post I wrote about the effects of Brexit as being a slow puncture gradually degrading the economy and well-being more generally. I mentioned that one aspect of that is the structural, demography-related, problem of labour shortages across all sectors, but hadn’t at that point read an excellent Bloomberg report published a couple of days earlier which provides a more detailed analysis of this. Notably, it contained the assessment of the senior UK economist at Bloomberg Economics that “Covid was a short sharp shock, but Brexit is a slow burn”. It’s fair to say that this gradual decline has always been the expectation of the vast majority of economic forecasts for Brexit, even before the pandemic, although what I mean by ‘slow puncture’ goes beyond economics to include all the social and cultural harms.
It would be perfectly possible to fill a blog post each week with further reports of this gradual falling apart of our country. The latest examples include how Brexit has deprived Britain of being the air freight gateway to Europe; the way that the post-pandemic bounce back of German trade is far less strong with the UK than with the EU and the US; the continued “dampening” effect of Brexit shown by the latest ONS trade figures (the Eurostat figures, which use a different methodology, paint a far worse picture); the mounting evidence of massive Japanese disinvestment in UK financial services; the gradual reintroduction of mobile roaming charges for British people visiting the EU; the 29% fall since the end of transition in goods flowing between Ireland and the rest of the EU via Great Britain, with the consequent ‘abandonment’ of, in particular, the port at Holyhead; supply shortages across the board that are partly or mainly attributable to Brexit, with KFC being a high profile example of a company affected and timber being an example of a key commodity affected.
It’s definitely worth recording these and other examples and, as I’ve often mentioned before, the ‘Kelemen archive’, comprising now an astonishing listing of 817 reputable reports of Brexit damage, is a key resource. However, it’s also important to understand that there are several different, though sometimes related, responses from Brexiters and the Brexit government to this unfolding disaster.
Denial and bluster
The most predictable of these, and perhaps now the least important, comes from the hardcore Brexit ideologues. In their world, the mounting damage is largely ignored, whilst bogus or misleading statistics are quoted to ‘prove’ the success of Brexit. A recent example, from the misnamed Brexit Facts website, uses the latest ONS trade statistics showing exports to the EU have risen 20% since the referendum to ask the rhetorical question “who needs EU’s single market?”. Whilst impressing the feeble-minded, this is of course an absurdity since Britain didn’t leave the single market at the time of the referendum, but only at the end of the transition period.
These kinds of claims are often linked to highly distorted representations of the warnings that were supposedly made about Brexit, sometimes by referring to Brexiters’ own hyperbolic descriptions of those warnings as being of economic 'Armageddon'. In particular, on trade, and economics more generally, they tend to confuse the warnings made of falls in anticipated growth with absolute falls, and the warnings of reductions in trade with warnings of an end to trade. Similarly, as Jonathan Lis points out in a recent acute analysis, they typically argue that because ‘the sky hasn’t fallen in’ then Brexit has been justified. But, Lis rightly says, “Brexit was marketed as a national rejuvenation, not something to be survived”.
Presumably in search of some signs of this rejuvenation, the ‘Brexit Facts’ website (like many similar ones) also devotes much attention to boosterish stories such as how Team GB won more Olympic medals than any individual EU country. Apart from Brexit being irrelevant to this, the report is amusing to read for the contortions it has to go through to point out (correctly) that the EU isn’t a single state, denying its members national identities, given that precisely this has been a persistent myth amongst Brexiters. The flip side of this kind of bluster about Brexit benefits is the obligatory weekly, if not daily, story in, especially, the Express about how the EU is on the point of collapse.
Performativity
Closely related to the denial and bluster, but perhaps slightly more respectable, or at least subtle, in the way that they mislead, are the ‘performative’ responses to Brexit. These are things which appear to be substantive gains from Brexit but which on examination are at best trivial or at worst untrue. The false claim about vaccine licensing is the most glaring example of the latter, though less commonly heard as the EU rollout gathers pace.
More persistent are the claims made about the rollover of trade deals with countries that the UK participated in as an EU member. Here, whilst it’s true that they couldn’t be made by the UK on its own when it was a member, they only more-or-less replicate what was there before Brexit. Closely related are the claims for prospective trade deals which are, or will be, new but which bestow very little economic benefit. They are performative in being ‘for show’ rather than being of great substance.
A recent variant of the same thing was the announcement that the UK is to become a ‘dialogue partner’ of ASEAN, the South-East Asian trade group. There’s nothing wrong about this, but the EU had been such a partner for years and, anyway, it doesn’t bestow any great prizes. Yet Dominic Raab announced it as a triumph (£), whilst arch-Brexiter Owen Paterson opined that it was a “very significant” development although nothing concrete is, or could be, claimed for it.
Similarly lacking in substance is the news that the UK’s new independent geographical indication (GI) scheme has awarded its first protection, to salt marsh lamb from Wales’s Gower peninsula. Yet, unlike EU GIs, it only applies to Great Britain (not Northern Ireland, despite being called UKGI), so at best it offers very limited protection and it’s not clear that there were many, if any, cases of farmers in other parts of Great Britain trying to pass their product off as Gower lamb.
Meanwhile, to achieve EU-wide protection for GB products, such as Gower salt marsh lamb, not previously registered as EU GIs (those which had been registered prior to the end of the transition period have been rolled over), a separate application and registration process will be necessary. So again, UKGI is performative without having much substance. It’s not a false story, and it’s not totally meaningless, it's just that like ‘independent trade policy’ it doesn’t mean very much beyond the symbolism of being ‘independent’.
Bombast
Whilst much of the government’s approach to Brexit now consists of such performative posturing, the summer political hiatus is masking its bombastic response to the realities of the Brexit it created as regards the Northern Ireland Protocol (NIP). September will see the resumption of what may quickly turn into a crisis, with the various grace periods set to expire at the end of that month. In the meantime, a substantial reshaping of Ireland-Northern Ireland trade continues apace. That matters, in two contradictory ways. On the one hand, unionists, and possibly Frost, will misuse this evidence of ‘diversion of trade’ as running counter to the NIP and warranting it suspension and re-negotiation. On the other hand, it shows the value of the NIP to the Northern Ireland economy, making suspension and re-negotiation foolish and unnecessary on that ground alone, let alone for wider political and diplomatic reasons.
The extent to which the NIP row escalates into crisis will depend in large part on whether David Frost and the government persist in insisting that the Protocol be, effectively, completely revised, and on whether they follow through on the repeated threat to ‘invoke Article 16’. If not, then perhaps this bombast will be re-assigned to the category of performative – making a show of independence but with no substance. As I’ve suggested before, that may in turn depend on wider considerations of domestic politics but, to some extent, whether over the NIP or something else, such as the previous ‘vaccines war’ or the emergent row over Gibraltar, there will always be some domestic value in picking fights with the EU.
Apart from the expiration of the various Northern Ireland grace periods, the other upcoming test of the government’s Brexit resolve is over the introduction of import controls on goods arriving from the EU. The next (and really the first substantive) stage in doing so will also come at the end of September. After that, export health certificates will be required for meat, cheese, eggs, fruit and vegetables and a wide variety of other food and drink products. But, as both the Fresh Produce Consortium and the Food and Drink Federation have made clear, neither industry nor government is ready for this. The result will be further disruptions to supplies in shops, on top of those already being caused by the lack of HGV drivers and other labour shortages and supply chain problems.
Thus, again, the question will be whether the government pushes on, in the name of ‘true independence’, or whether it decides to again postpone import controls (the October phase was originally meant to have been implemented in March, and the EU’s controls were in place for the end of the transition period). I sometimes see people on social media suggesting that a continuing failure to implement import controls would violate WTO rules, because it would discriminate between EU and non-EU importers, but my understanding – for what little that is worth on this issue – is that this is largely theoretical: any action against the UK would be very slow and the penalties nugatory. Rather, again the decision will depend on a domestic political calculation of how much inconvenience the public will put up with for the sake of Brexiters’ eighteenth-century notion of sovereignty.
Quiet realism
The recurring tension between Brexit purism and pragmatic realism is being played out, more or less under the radar of public attention, as different sectors of society and the economy are quietly accommodating to the new restrictions and inconveniences of Brexit. So, for example, what were supposed to be the temporary Operation Brock powers to manage post-Brexit lorry queues to the channel ports are to be made permanent.
Equally, as has been happening for months, firms are adjusting to the Brexit trade barriers by learning to deal with them or, especially in the case of many small firms, giving up on trading with the EU. Each example may get little or no news coverage, and the overall effect may not even be very visible in aggregate trade figures, since small traders are, by definition, small. But it is quietly reshaping the structure of the British trading economy to the detriment of small businesses – an ironic outcome given the persistent claim that Brexit would benefit such firms whereas it was supposedly only ‘big business’ that gained from EU membership.
Other forms of quiet realism are to do with how regulation operates. In my previous post I discussed some of the issues of regulatory duplication. Because of the problems this poses, some sectoral regulation is gradually being redesigned because of Brexit. An important example is regulation of medicines and medical devices, the subject of an extensive report in the Financial Times this week (£).
The Medicines and Healthcare Products Regulatory Agency (MHRA) is supposed to “seize the opportunities” following from departing from the EU regulatory system and was identified in Iain Duncan Smith’s TIGRR Report as having the basis to expand and become a world-leading regulator. This was against the background in which, having hosted the European Medicines Agency (EMA), the UK had indeed been central to the global regulatory nexus with important consequences for its position as hub of the bio-medical and pharmaceutical industries. The EMA was lost with Brexit, but so too was the flow of funds to the MHRA from the EU for medical authorisation. That, along with other budgetary cuts, now means that the MHRA looks set to be scaled back.
One potential consequence, according to the FT report, is that companies will seek authorisations from EU or US regulatory agencies, with MHRA becoming a rubber stamp in the UK market for decisions made elsewhere. If this is so, it undermines the idea of the UK becoming a world-leading regulator – and that probably has knock-on implications for the wider scientific and industrial eco-system – but, and this is my point here, it will also be a recognition of the reality that the UK cannot be a ‘regulatory superpower’ in the medical or any other sector, and for that matter cannot even afford to try.
As such it directly contradicts the naïve ideas of, especially, David Frost about the UK having regulatory sovereignty in the modern world, and the equally naïve idea that the UK could become an international regulator. Something similar is unfolding even in the area of financial services (£), where the UK is undoubtedly a major player. Yet the core dynamic is the same as for other sectors: creating two separate regulatory regimes, EU and UK, is too expensive but the UK on its own isn’t large enough to become a global regulator.
So, again under the radar, and beneath the bombast of ‘independence’, the UK is gradually morphing from being a rule-shaper to being a rule-taker. Of course there will be scope for some tinkering around the edges, and when that happens it will be the subject of performative triumphalism, and in turn feed the denial and bluster of the hardcore Brexiters. But in broad terms the realities of regulatory realpolitik will hold sway.
Noisy fantasy
It isn’t glib to draw comparisons with the unfolding catastrophe of the Trump-initiated withdrawal from Afghanistan, because there are parallels in the way that once the US decided to leave it was inevitable that the UK did the same (just as the UK would never have deployed there had the US not done so). Brief talk of the UK leading a new international coalition was nonsense and came to nothing. For, despite the bravado of the recent deployment of the UK’s Carrier Strike Group in the South China Sea, any idea of ‘Global Britain’ as a military superpower is a long-dead fantasy.
That has been obvious since at least the Suez crisis, although the embers of the fantasy have long smouldered, and were fanned by post-Brexit nationalist hubris exemplified by Johnson’s ‘East of Suez’ speech when Foreign Secretary. Now, caught between US isolationism and self-imposed and antagonistic isolation from the EU, UK post-Brexit foreign and defence policy looks not so much incoherent as non-existent.
Even the residual diplomatic and soft power strengths we had have been depleted by Brexit and Johnson, whilst nativist Brexity sensibilities shape the spiteful policies on accepting refugees and on overseas aid, thus limiting those few things which Britain can still offer Afghans. Meanwhile calls for the Taliban to honour the commitments they have made ring hollow coming from a government that treats the deal it signed with the EU over Northern Ireland as disposable.
Beyond all that, the Afghanistan crisis once again exposes the sheer mediocrity of a government which, from Johnson downwards, is staffed by those whose real or feigned enthusiasm for Brexit was the sole criterion for ministerial office.
Silence
It is as fantastical to imagine Global Britain as an economic or regulatory superpower as it is to pretend it is a great military power. Brexit increasingly looks like the classroom in which these lessons are being taught, albeit that the hardcore Brexiters are slow pupils, sitting slack-jawed at the back, alternating sticking their fingers in their ears with shouting insults at the teacher and their fellow students. Meanwhile the majority of them sit silently, no longer mentioning the Brexit for which they made such extravagant promises until so recently. To be fair, there are a few - such as Shanker Singham still blathering on about creating ‘smart’ borders, a Pacific trade tilt and unspecified regulatory reforms - who are permanently stuck in the pre-2020 bubble. But for the most part it is as if they would like us to forget all those promises, to forget, indeed, that Brexit ever happened. When, for example, did anyone last hear anything from Michael Gove?
In that amnesia, they are considerably aided by the relative lack of media attention to what is happening. It’s not that the so-called ‘mainstream media’ does not cover Brexit, but that for various reasons it does so in fairly muted ways. For example, this week’s story of Nando’s closing restaurants for lack of chicken supplies was reported on the BBC website as only affecting Great Britain, not Northern Ireland (or Ireland), making it obvious that Brexit must be the key factor and yet it was not mentioned. It’s true that the main lunchtime BBC1 news bulletin covering the story on Wednesday did use the B-word, once, but it was muffled in a list of various factors. Given his own public statements, it is hard to resist the conclusion that Tim Davie’s leadership has, even if only indirectly, influenced this approach, along with the ferocious criticism of the BBC from Brexiters and the government.
But, as for all news outlets, it is more complicated than that. For one thing, precisely because the Brexit effects constitute a ‘slow puncture’ they don’t make for headline news. There may also be a sense amongst journalists, for whom topicality is inevitably important, that Brexit is ‘yesterday’s story’. Both of these factors also mean that it is hard for Brexit to compete for news space with big, current stories, and of course that has been especially true over the last eighteen months when the pandemic has inevitably been centre stage. And the pandemic, in particular, in its interactions with everything from trade volumes to labour shortages has served to complicate many stories which might otherwise be straightforwardly about Brexit.
Beyond the media, it seems likely that companies, like Nando’s, damaged by Brexit are sometimes reluctant to name it for fear of offending many customers and in some cases, perhaps, the government. There’s a circularity here, because where they do explicitly name Brexit as the cause, as trade bodies unequivocally did this week in relation to the “chaos” in the poultry industry that is the main cause of Nando’s (and KFC’s) woes, it becomes much easier and more likely for the media to do so, even as far down the journalistic food chain as the Express.
All of this means that, except for the minority of people who are passionately engaged, a lot of the public are quite apathetic about, and probably largely unaware of, the many significant and ongoing Brexit developments. Again there is a circularity in this, as it is partly a consequence of the relative lack of media coverage, whilst that lack of coverage is partly a reflection of lack of public interest. It also results from the wariness of the Labour Party in tackling the consequences of Brexit, since the one thing that the official opposition does have the power to do is influence the news agenda.
As I have recently noted, and I’m not the only one (£), there are signs that Labour is beginning to speak more loudly about Brexit. In any case, Brexit will come back to public attention when import controls start to be introduced and when the NIP row resumes. No matter what some Brexiters may now hope, Brexit isn’t going to be forgotten nor, by many, will it be forgiven. As events even in this quiet summer show, we will be living with Brexit for a long time yet.
It would be perfectly possible to fill a blog post each week with further reports of this gradual falling apart of our country. The latest examples include how Brexit has deprived Britain of being the air freight gateway to Europe; the way that the post-pandemic bounce back of German trade is far less strong with the UK than with the EU and the US; the continued “dampening” effect of Brexit shown by the latest ONS trade figures (the Eurostat figures, which use a different methodology, paint a far worse picture); the mounting evidence of massive Japanese disinvestment in UK financial services; the gradual reintroduction of mobile roaming charges for British people visiting the EU; the 29% fall since the end of transition in goods flowing between Ireland and the rest of the EU via Great Britain, with the consequent ‘abandonment’ of, in particular, the port at Holyhead; supply shortages across the board that are partly or mainly attributable to Brexit, with KFC being a high profile example of a company affected and timber being an example of a key commodity affected.
It’s definitely worth recording these and other examples and, as I’ve often mentioned before, the ‘Kelemen archive’, comprising now an astonishing listing of 817 reputable reports of Brexit damage, is a key resource. However, it’s also important to understand that there are several different, though sometimes related, responses from Brexiters and the Brexit government to this unfolding disaster.
Denial and bluster
The most predictable of these, and perhaps now the least important, comes from the hardcore Brexit ideologues. In their world, the mounting damage is largely ignored, whilst bogus or misleading statistics are quoted to ‘prove’ the success of Brexit. A recent example, from the misnamed Brexit Facts website, uses the latest ONS trade statistics showing exports to the EU have risen 20% since the referendum to ask the rhetorical question “who needs EU’s single market?”. Whilst impressing the feeble-minded, this is of course an absurdity since Britain didn’t leave the single market at the time of the referendum, but only at the end of the transition period.
These kinds of claims are often linked to highly distorted representations of the warnings that were supposedly made about Brexit, sometimes by referring to Brexiters’ own hyperbolic descriptions of those warnings as being of economic 'Armageddon'. In particular, on trade, and economics more generally, they tend to confuse the warnings made of falls in anticipated growth with absolute falls, and the warnings of reductions in trade with warnings of an end to trade. Similarly, as Jonathan Lis points out in a recent acute analysis, they typically argue that because ‘the sky hasn’t fallen in’ then Brexit has been justified. But, Lis rightly says, “Brexit was marketed as a national rejuvenation, not something to be survived”.
Presumably in search of some signs of this rejuvenation, the ‘Brexit Facts’ website (like many similar ones) also devotes much attention to boosterish stories such as how Team GB won more Olympic medals than any individual EU country. Apart from Brexit being irrelevant to this, the report is amusing to read for the contortions it has to go through to point out (correctly) that the EU isn’t a single state, denying its members national identities, given that precisely this has been a persistent myth amongst Brexiters. The flip side of this kind of bluster about Brexit benefits is the obligatory weekly, if not daily, story in, especially, the Express about how the EU is on the point of collapse.
Performativity
Closely related to the denial and bluster, but perhaps slightly more respectable, or at least subtle, in the way that they mislead, are the ‘performative’ responses to Brexit. These are things which appear to be substantive gains from Brexit but which on examination are at best trivial or at worst untrue. The false claim about vaccine licensing is the most glaring example of the latter, though less commonly heard as the EU rollout gathers pace.
More persistent are the claims made about the rollover of trade deals with countries that the UK participated in as an EU member. Here, whilst it’s true that they couldn’t be made by the UK on its own when it was a member, they only more-or-less replicate what was there before Brexit. Closely related are the claims for prospective trade deals which are, or will be, new but which bestow very little economic benefit. They are performative in being ‘for show’ rather than being of great substance.
A recent variant of the same thing was the announcement that the UK is to become a ‘dialogue partner’ of ASEAN, the South-East Asian trade group. There’s nothing wrong about this, but the EU had been such a partner for years and, anyway, it doesn’t bestow any great prizes. Yet Dominic Raab announced it as a triumph (£), whilst arch-Brexiter Owen Paterson opined that it was a “very significant” development although nothing concrete is, or could be, claimed for it.
Similarly lacking in substance is the news that the UK’s new independent geographical indication (GI) scheme has awarded its first protection, to salt marsh lamb from Wales’s Gower peninsula. Yet, unlike EU GIs, it only applies to Great Britain (not Northern Ireland, despite being called UKGI), so at best it offers very limited protection and it’s not clear that there were many, if any, cases of farmers in other parts of Great Britain trying to pass their product off as Gower lamb.
Meanwhile, to achieve EU-wide protection for GB products, such as Gower salt marsh lamb, not previously registered as EU GIs (those which had been registered prior to the end of the transition period have been rolled over), a separate application and registration process will be necessary. So again, UKGI is performative without having much substance. It’s not a false story, and it’s not totally meaningless, it's just that like ‘independent trade policy’ it doesn’t mean very much beyond the symbolism of being ‘independent’.
Bombast
Whilst much of the government’s approach to Brexit now consists of such performative posturing, the summer political hiatus is masking its bombastic response to the realities of the Brexit it created as regards the Northern Ireland Protocol (NIP). September will see the resumption of what may quickly turn into a crisis, with the various grace periods set to expire at the end of that month. In the meantime, a substantial reshaping of Ireland-Northern Ireland trade continues apace. That matters, in two contradictory ways. On the one hand, unionists, and possibly Frost, will misuse this evidence of ‘diversion of trade’ as running counter to the NIP and warranting it suspension and re-negotiation. On the other hand, it shows the value of the NIP to the Northern Ireland economy, making suspension and re-negotiation foolish and unnecessary on that ground alone, let alone for wider political and diplomatic reasons.
The extent to which the NIP row escalates into crisis will depend in large part on whether David Frost and the government persist in insisting that the Protocol be, effectively, completely revised, and on whether they follow through on the repeated threat to ‘invoke Article 16’. If not, then perhaps this bombast will be re-assigned to the category of performative – making a show of independence but with no substance. As I’ve suggested before, that may in turn depend on wider considerations of domestic politics but, to some extent, whether over the NIP or something else, such as the previous ‘vaccines war’ or the emergent row over Gibraltar, there will always be some domestic value in picking fights with the EU.
Apart from the expiration of the various Northern Ireland grace periods, the other upcoming test of the government’s Brexit resolve is over the introduction of import controls on goods arriving from the EU. The next (and really the first substantive) stage in doing so will also come at the end of September. After that, export health certificates will be required for meat, cheese, eggs, fruit and vegetables and a wide variety of other food and drink products. But, as both the Fresh Produce Consortium and the Food and Drink Federation have made clear, neither industry nor government is ready for this. The result will be further disruptions to supplies in shops, on top of those already being caused by the lack of HGV drivers and other labour shortages and supply chain problems.
Thus, again, the question will be whether the government pushes on, in the name of ‘true independence’, or whether it decides to again postpone import controls (the October phase was originally meant to have been implemented in March, and the EU’s controls were in place for the end of the transition period). I sometimes see people on social media suggesting that a continuing failure to implement import controls would violate WTO rules, because it would discriminate between EU and non-EU importers, but my understanding – for what little that is worth on this issue – is that this is largely theoretical: any action against the UK would be very slow and the penalties nugatory. Rather, again the decision will depend on a domestic political calculation of how much inconvenience the public will put up with for the sake of Brexiters’ eighteenth-century notion of sovereignty.
Quiet realism
The recurring tension between Brexit purism and pragmatic realism is being played out, more or less under the radar of public attention, as different sectors of society and the economy are quietly accommodating to the new restrictions and inconveniences of Brexit. So, for example, what were supposed to be the temporary Operation Brock powers to manage post-Brexit lorry queues to the channel ports are to be made permanent.
Equally, as has been happening for months, firms are adjusting to the Brexit trade barriers by learning to deal with them or, especially in the case of many small firms, giving up on trading with the EU. Each example may get little or no news coverage, and the overall effect may not even be very visible in aggregate trade figures, since small traders are, by definition, small. But it is quietly reshaping the structure of the British trading economy to the detriment of small businesses – an ironic outcome given the persistent claim that Brexit would benefit such firms whereas it was supposedly only ‘big business’ that gained from EU membership.
Other forms of quiet realism are to do with how regulation operates. In my previous post I discussed some of the issues of regulatory duplication. Because of the problems this poses, some sectoral regulation is gradually being redesigned because of Brexit. An important example is regulation of medicines and medical devices, the subject of an extensive report in the Financial Times this week (£).
The Medicines and Healthcare Products Regulatory Agency (MHRA) is supposed to “seize the opportunities” following from departing from the EU regulatory system and was identified in Iain Duncan Smith’s TIGRR Report as having the basis to expand and become a world-leading regulator. This was against the background in which, having hosted the European Medicines Agency (EMA), the UK had indeed been central to the global regulatory nexus with important consequences for its position as hub of the bio-medical and pharmaceutical industries. The EMA was lost with Brexit, but so too was the flow of funds to the MHRA from the EU for medical authorisation. That, along with other budgetary cuts, now means that the MHRA looks set to be scaled back.
One potential consequence, according to the FT report, is that companies will seek authorisations from EU or US regulatory agencies, with MHRA becoming a rubber stamp in the UK market for decisions made elsewhere. If this is so, it undermines the idea of the UK becoming a world-leading regulator – and that probably has knock-on implications for the wider scientific and industrial eco-system – but, and this is my point here, it will also be a recognition of the reality that the UK cannot be a ‘regulatory superpower’ in the medical or any other sector, and for that matter cannot even afford to try.
As such it directly contradicts the naïve ideas of, especially, David Frost about the UK having regulatory sovereignty in the modern world, and the equally naïve idea that the UK could become an international regulator. Something similar is unfolding even in the area of financial services (£), where the UK is undoubtedly a major player. Yet the core dynamic is the same as for other sectors: creating two separate regulatory regimes, EU and UK, is too expensive but the UK on its own isn’t large enough to become a global regulator.
So, again under the radar, and beneath the bombast of ‘independence’, the UK is gradually morphing from being a rule-shaper to being a rule-taker. Of course there will be scope for some tinkering around the edges, and when that happens it will be the subject of performative triumphalism, and in turn feed the denial and bluster of the hardcore Brexiters. But in broad terms the realities of regulatory realpolitik will hold sway.
Noisy fantasy
It isn’t glib to draw comparisons with the unfolding catastrophe of the Trump-initiated withdrawal from Afghanistan, because there are parallels in the way that once the US decided to leave it was inevitable that the UK did the same (just as the UK would never have deployed there had the US not done so). Brief talk of the UK leading a new international coalition was nonsense and came to nothing. For, despite the bravado of the recent deployment of the UK’s Carrier Strike Group in the South China Sea, any idea of ‘Global Britain’ as a military superpower is a long-dead fantasy.
That has been obvious since at least the Suez crisis, although the embers of the fantasy have long smouldered, and were fanned by post-Brexit nationalist hubris exemplified by Johnson’s ‘East of Suez’ speech when Foreign Secretary. Now, caught between US isolationism and self-imposed and antagonistic isolation from the EU, UK post-Brexit foreign and defence policy looks not so much incoherent as non-existent.
Even the residual diplomatic and soft power strengths we had have been depleted by Brexit and Johnson, whilst nativist Brexity sensibilities shape the spiteful policies on accepting refugees and on overseas aid, thus limiting those few things which Britain can still offer Afghans. Meanwhile calls for the Taliban to honour the commitments they have made ring hollow coming from a government that treats the deal it signed with the EU over Northern Ireland as disposable.
Beyond all that, the Afghanistan crisis once again exposes the sheer mediocrity of a government which, from Johnson downwards, is staffed by those whose real or feigned enthusiasm for Brexit was the sole criterion for ministerial office.
Silence
It is as fantastical to imagine Global Britain as an economic or regulatory superpower as it is to pretend it is a great military power. Brexit increasingly looks like the classroom in which these lessons are being taught, albeit that the hardcore Brexiters are slow pupils, sitting slack-jawed at the back, alternating sticking their fingers in their ears with shouting insults at the teacher and their fellow students. Meanwhile the majority of them sit silently, no longer mentioning the Brexit for which they made such extravagant promises until so recently. To be fair, there are a few - such as Shanker Singham still blathering on about creating ‘smart’ borders, a Pacific trade tilt and unspecified regulatory reforms - who are permanently stuck in the pre-2020 bubble. But for the most part it is as if they would like us to forget all those promises, to forget, indeed, that Brexit ever happened. When, for example, did anyone last hear anything from Michael Gove?
In that amnesia, they are considerably aided by the relative lack of media attention to what is happening. It’s not that the so-called ‘mainstream media’ does not cover Brexit, but that for various reasons it does so in fairly muted ways. For example, this week’s story of Nando’s closing restaurants for lack of chicken supplies was reported on the BBC website as only affecting Great Britain, not Northern Ireland (or Ireland), making it obvious that Brexit must be the key factor and yet it was not mentioned. It’s true that the main lunchtime BBC1 news bulletin covering the story on Wednesday did use the B-word, once, but it was muffled in a list of various factors. Given his own public statements, it is hard to resist the conclusion that Tim Davie’s leadership has, even if only indirectly, influenced this approach, along with the ferocious criticism of the BBC from Brexiters and the government.
But, as for all news outlets, it is more complicated than that. For one thing, precisely because the Brexit effects constitute a ‘slow puncture’ they don’t make for headline news. There may also be a sense amongst journalists, for whom topicality is inevitably important, that Brexit is ‘yesterday’s story’. Both of these factors also mean that it is hard for Brexit to compete for news space with big, current stories, and of course that has been especially true over the last eighteen months when the pandemic has inevitably been centre stage. And the pandemic, in particular, in its interactions with everything from trade volumes to labour shortages has served to complicate many stories which might otherwise be straightforwardly about Brexit.
Beyond the media, it seems likely that companies, like Nando’s, damaged by Brexit are sometimes reluctant to name it for fear of offending many customers and in some cases, perhaps, the government. There’s a circularity here, because where they do explicitly name Brexit as the cause, as trade bodies unequivocally did this week in relation to the “chaos” in the poultry industry that is the main cause of Nando’s (and KFC’s) woes, it becomes much easier and more likely for the media to do so, even as far down the journalistic food chain as the Express.
All of this means that, except for the minority of people who are passionately engaged, a lot of the public are quite apathetic about, and probably largely unaware of, the many significant and ongoing Brexit developments. Again there is a circularity in this, as it is partly a consequence of the relative lack of media coverage, whilst that lack of coverage is partly a reflection of lack of public interest. It also results from the wariness of the Labour Party in tackling the consequences of Brexit, since the one thing that the official opposition does have the power to do is influence the news agenda.
As I have recently noted, and I’m not the only one (£), there are signs that Labour is beginning to speak more loudly about Brexit. In any case, Brexit will come back to public attention when import controls start to be introduced and when the NIP row resumes. No matter what some Brexiters may now hope, Brexit isn’t going to be forgotten nor, by many, will it be forgiven. As events even in this quiet summer show, we will be living with Brexit for a long time yet.
Friday, 6 August 2021
Britain's Brexit slow puncture
At the corner of my road is a display board for local notices and, recently, the council have put one up about a project to support local businesses and community organizations to re-open as Covid restrictions ease. Prominently and, to my mind, poignantly displayed on the sign is an EU logo, for this project is part-funded by the EU Regional Development Fund. I assume it is the very last trickle of money from the 2014-2020 programme.
It’s a reminder that although the Brexit process has been going on for years, we are actually only eight months into being substantively outside of the EU. Not only that, but in many respects we have not yet experienced the full reality of it.
Travel to and within the EU
The pandemic is one obvious reason, because it has curtailed both leisure and business travel to EU countries. The latter will be especially significant for services trade, as Head of Trade Policy at the British Chambers of Commerce explained this week. A particular sub-set of this, which has received much media attention, is the impact on European touring for musicians and other performance artists. A highly misleading government announcement this week implied that some new agreements had been reached on this, but, despite reports taking this implication as if it were a fact, it actually only confirmed what was already known about visas and didn’t address the underlying problems of touring.
In any case, many people who would otherwise have done so have yet to encounter the new complexities and restrictions such travel now involves for British people, with more to come in 2023 when the European Travel Information and Authorisation Scheme begins (inevitably described as “new Brexit punishment” by the Express). Similarly, anyone who in lockdown has watched old episodes of those TV shows about relocating to Spain, France, Cyprus and so on will be in for a nasty shock if they are inspired now to try it for themselves. For whilst it is still possible, it is much more difficult: one of the more incoherent Brexiter ideas was that ending freedom of movement of people would radically reduce the number of EU citizens moving to Britain yet, somehow, would scarcely, if at all, impact on British citizens’ freedom to move to EU countries.
Introducing import controls
Then there is the staggered introduction of so many aspects of Brexit. The various grace periods in the operation of the Northern Ireland Protocol have featured fairly prominently in the media. Perhaps less widely reported is the fact that the UK has yet to introduce full controls on EU imports. This might seem surprising given that the decision that Brexit meant leaving the single market and customs union was taken in January 2017 and, after all, the EU was ready to impose its import controls at the end of the transition. The reason is a mixture of the persistent failure to understand that this was bound to mean border controls, the political problem of admitting it when it seemed conceivable that Brexit might still be reversed, and the stubborn refusal to extend the transition period when it was possible.
So in the government’s desperate hurry to declare ‘independence day’ it ignored its own lack of preparation to be independent. Indeed, in March, it postponed phases two and three of the Border Operating Model so that controls which were due to begin in April and July of this year have been pushed backwards. However, as with the expiry of the Northern Ireland grace periods, in the absence of further postponements the date for these controls to begin is rapidly approaching.
This means that from October 1 2021 - less than two months away - there will be checks on agri-food and feed documentation, with the next and main tranche of controls coming in on January 1 2022, and the final stage, covering live animals and low-risk plant products, being introduced in March 2022. Only then will the Brexit controls on UK-EU trade in both directions be fully in place. One significant problem, which already exists but will be exacerbated once import controls are in place, is a chronic shortage of the vets needed to undertake the necessary checks, itself caused in part by the end of freedom of movement of people.
Still later – in March 2023, it was announced this week – will the much-delayed Customs Declaration Service IT system be fully up and running (in the meantime, the antiquated and creaking CHIEF system [£] will remain in place). It wouldn’t exactly be surprising, given the history of government IT projects, including this one, if there were further delays. All these dates become the more remarkable considering that the entire Trade and Cooperation Agreement will be up for review after five years of being in force, meaning the end of 2025, whilst the Northern Ireland Assembly will vote on continuing consent to the Protocol in December 2024.
Although it may be that introducing import controls results in some significant disruption it would be better, as I’ve argued before, to see the effects of Brexit in terms of a slow puncture than a dramatic tyre blow-out. It will probably be like the immediate and visible effects of export controls (i.e. EU import controls), which have ‘settled down’ in the sense of beginning to make a long-term adjustment to trade being at lower levels than before. This has important political (non-)consequences, because, despite what some have expected and may still expect, there’s unlikely to be any ‘moment of realisation’ when public opinion registers the damage of Brexit.
Instead, there will be a gradual decline which, as with the current widespread reports of empty shelves and unpicked produce, causes inconvenience but probably no dramatic crisis (though some warn of it). The underlying issue of labour shortages means it will be the same story across many sectors, from construction to hospitality. But, because this isn’t a controlled experiment, it was always going to be hard to definitively explain the decline in terms of Brexit, and the pandemic makes that even more difficult. Even if it’s true that it is only the UK, and not EU countries, which is seeing these problems, that isn’t going to register with most voters.
Investment and regulation
Still less will the negative impact on foreign direct investment (FDI) in the UK register, although in the long-run that may be much more important than supply chain disruptions. Here again there will be debates amongst commentators and politicians about the role of Brexit but, as with UK-EU trade, the key point is that in what are inevitably multi-factorial issues the contribution of Brexit can only be a negative one. By definition it depresses UK-EU trade compared with not-Brexit, even if there is scope to argue about the precise extent, because it introduces new barriers to trade.
On FDI (not to be confused with overseas acquisitions of UK businesses, often by private equity firms, which is happening apace because of low company valuations caused in part by Brexit [£]) and related issues the only argument that Brexit would be beneficial is based on the creation of a more attractive regulatory environment. But, so far, ideas for what this would consist of have proved elusive, hence the recent TIGRR report was so anodyne.
The reason for this is that, despite years of propaganda to the contrary, neither EU regulation nor regulation in general have been major problems for UK business. Unsurprisingly, therefore, in a key industry often cited as a prime example for the advantages of regulatory freedom, financial services, recent regulatory reforms, whilst extensive, have not been radical (£). And, interestingly, despite the claims sometimes made about the ‘real agenda’ of Brexit, the government, at least for now, is resistant to removing the EU cap on bankers’ bonuses (£).
Conformity assessment
Meanwhile, as I’ve been flagging up since March, manufacturers, far from being freed from ‘red tape’, will have to implement the new UK Conformity Assessment (UKCA) registration and marking system in order to sell most goods in Great Britain from January 2022. This replaces the CE mark which will, however, continue to be needed to sell goods in the EU. The CE mark will also be valid in Northern Ireland, as will the UKNI mark (though not the UKCA mark) which can also be used by Northern Irish companies selling in Great Britain, but not in the EU, including Ireland, which will require a CE mark. There are also rules about the various combinations of CE, UKCA and UKNI markings that are permissible within different markets.
It’s exactly the kind of double (or triple?) regulatory burden that the single market abolished, and it’s also very unclear whether the UKCA assessment system will be up and running in time. Even if it is, it’s equally unclear whether firms will be ready. It is small firms which are most likely to struggle, as with the new trade barriers (of course it is also, itself, a new trade barrier but it will also affect those firms which only sell domestically).
Regulatory issues go beyond the generic one of UKCA registration, so that different industries and sectors face different challenges. A complicated example is the medical devices sector (which has secured an extension on the use of the CE mark until June 2023). An EU-wide system was still under development as Brexit happened, and the UK is set to develop its own system but it is not yet in place and it is as yet unclear how it will work. Another example is the huge cost to the chemicals industry (and, actually, beyond) of creating the UK REACH system in place of REACH, the EU system, which has also often been mentioned before on this blog, and has had quite a bit of media coverage (£). A sub-set of this is the particular problem faced by suppliers of biocidal products, which from the end of 2022 will have to achieve ‘GB Article 95 listing’ to supply the British market.
What all these examples, and many others that could be given, share is the basic issue that the UK/GB market in itself is relatively small, thus having its own regulatory system may simply make that market too costly to service, especially for smaller firms, and more costly for those who continue to do so. This in turn means it will be more difficult and costly – or in some cases simply impossible - for British customers to buy the goods they want. For example, the UKCA mark will be needed to sell goods in Great Britain but will not be recognized anywhere other than Great Britain, so the incentive not just for companies in the EU but anywhere else in the world to register is relatively small, and for some products may be tiny.
The bizarre irony is that, in many and probably most cases, it isn’t that actual product standards are set to diverge from EU standards and, quite possibly, they never will. It is that there are, or will be, different processes (and associated costs) of testing and registration in Great Britain and the EU (and Northern Ireland). Nor is this an inevitable consequence of Brexit or even of hard Brexit: it flows for the most part from the Johnson approach of prioritizing sovereignty above all else. So we pay a massive price – how much is hard to say, but just the cost to the chemical industry of UK REACH is estimated as £1 billion (£) - simply for the theoretical possibility of regulatory divergence.
Spending our own money
Apart from regulatory freedom, Brexit also promised freedom to spend ‘our money’ as we wished. So, going back to that notice about EU regional funding, the Brexiter response would be that it is only our own money being (partially) returned to us. This, of course, was the Leave campaign’s central economic case - the £350 million a week for the NHS. The idea was that all the EU funds for regional development, farming support, science and so on would still be available, plus a dollop on top. It was always (even stripped of the dishonest conflation of net and gross payments) a lie, because it treated the budget deficit as an entire cost-benefit analysis of EU membership. So, in fact, because of the overall effects of Brexit, none of that promised money exists. Instead, as for example Wales is currently finding, replacing former EU funds is a hit-and-miss battle within the context of general government spending allocations, as it was always going to be, for a share of a smaller pie than there would otherwise have been. Some may get lucky, others won’t.
Away from economics (although not without an economic dimension) it is only gradually that things like the end of participation in the Erasmus + scheme will be felt. A rather boosterish piece in the Sunday Times (£) extolled the “wider opportunities” of the UK’s replacement Turing scheme. But, aside from the perhaps limited attractiveness of some of the destination countries, the key fact that the scheme doesn’t guarantee tuition fee waivers means it is a far from adequate replacement. And whilst the UK will continue to participate in Horizon Europe, the EU science programme, the post-referendum experience of Horizon 2020, its predecessor, suggests that here, too, the UK will be in a worse place.
All of these impacts are to some degree tangible and measurable, even if that doesn’t translate into public awareness. And as the extraordinary ‘Kelemen Archive’ (the link is to item #754, currently the latest entry) documenting Brexit damage stories shows, they extend to almost every sector of British society and economy. Yet they do not exhaust the slow-burn damage of Brexit. That includes the many ways in which political conventions have been strained or broken, and political discourse made more toxic. It also includes the erosion of geo-political status associated with Brexit itself, as well as the reputational cost of the government’s serial dishonesty, especially as regards the Northern Ireland Protocol.
As regards the latter, having written at such length about it in several recent posts, and with events having temporarily quietened because of summer holidays, I’ll say no more except that playing with the stability and security of Northern Ireland is one of the worst aspects of what Brexit is doing. But, again, how much does it register with the electorate in England, at least?
Judgment day?
Although they didn’t mention it at the time of the referendum, it has become common now for Brexiters to say that the benefits of Brexit will not reveal themselves for years. That is convenient cover in all kinds of ways, including how it falsifies another Brexiter claim – made again recently by Dominic Cummings - that, by ‘taking back control’, the public will hold MPs accountable for systemic failings. There’s little chance of that if we have to wait 50, or even 100, years before passing judgment on Farage, Johnson, Gove et al.
Even if that judgment comes sooner, there seems very little prospect of some cathartic moment in which it becomes ‘received wisdom’ that Brexit was a colossal, historic blunder. It’s true that things can change – public support for Munich, Suez or Iraq dissipated more or less quickly – but it is possibly easier to recognize and admit foreign policy failures than those deeply embedded in domestic politics and cultural identity. It’s also true that these are, indeed, very early days and something – more likely something political, like Scottish independence, than something economic, like declining trade – could jolt England out of its apathy.
But for the time being I think it’s more likely that we will get gradually poorer than we would have been, living more restricted lives than we would have had, having more complex and burdensome regulation, and with our standard of living - in both economic and more extensive senses - slowly slipping behind those of other North and West European countries.
To re-iterate, no one lives in the counterfactual world in which Brexit didn’t take place. So although those of us who recognize what is happening will mourn our losses and rail against them, just as many, if not more, will deny the reality or be unaware of it, or simply – in one of the more endearing of English ways – mutter ‘mustn’t grumble’ and ‘it could be worse’ and settle down with a nice cup of tea.
That assumes that there is still tea in the shops, of course, despite supply chain disruptions. It would be strange if after all the World War Two nostalgia surrounding Brexit, Johnson found, as his hero Churchill knew only too well, that lack of tea might be the one thing to spell real trouble for the government.
I may not post every week over the summer – it will depend on whether there is any important or interesting Brexit news. If you want some holiday reading in its place, and haven’t read it yet, you might consider getting hold of my book! It’s called Brexit Unfolded. How no one got what they wanted (and why they were never going to) and was published by Biteback on 23 June 2021. It can be ordered from Biteback, or via other online platforms, as a paperback or e-book. For reviews, podcasts etc. see this page.
It’s a reminder that although the Brexit process has been going on for years, we are actually only eight months into being substantively outside of the EU. Not only that, but in many respects we have not yet experienced the full reality of it.
Travel to and within the EU
The pandemic is one obvious reason, because it has curtailed both leisure and business travel to EU countries. The latter will be especially significant for services trade, as Head of Trade Policy at the British Chambers of Commerce explained this week. A particular sub-set of this, which has received much media attention, is the impact on European touring for musicians and other performance artists. A highly misleading government announcement this week implied that some new agreements had been reached on this, but, despite reports taking this implication as if it were a fact, it actually only confirmed what was already known about visas and didn’t address the underlying problems of touring.
In any case, many people who would otherwise have done so have yet to encounter the new complexities and restrictions such travel now involves for British people, with more to come in 2023 when the European Travel Information and Authorisation Scheme begins (inevitably described as “new Brexit punishment” by the Express). Similarly, anyone who in lockdown has watched old episodes of those TV shows about relocating to Spain, France, Cyprus and so on will be in for a nasty shock if they are inspired now to try it for themselves. For whilst it is still possible, it is much more difficult: one of the more incoherent Brexiter ideas was that ending freedom of movement of people would radically reduce the number of EU citizens moving to Britain yet, somehow, would scarcely, if at all, impact on British citizens’ freedom to move to EU countries.
Introducing import controls
Then there is the staggered introduction of so many aspects of Brexit. The various grace periods in the operation of the Northern Ireland Protocol have featured fairly prominently in the media. Perhaps less widely reported is the fact that the UK has yet to introduce full controls on EU imports. This might seem surprising given that the decision that Brexit meant leaving the single market and customs union was taken in January 2017 and, after all, the EU was ready to impose its import controls at the end of the transition. The reason is a mixture of the persistent failure to understand that this was bound to mean border controls, the political problem of admitting it when it seemed conceivable that Brexit might still be reversed, and the stubborn refusal to extend the transition period when it was possible.
So in the government’s desperate hurry to declare ‘independence day’ it ignored its own lack of preparation to be independent. Indeed, in March, it postponed phases two and three of the Border Operating Model so that controls which were due to begin in April and July of this year have been pushed backwards. However, as with the expiry of the Northern Ireland grace periods, in the absence of further postponements the date for these controls to begin is rapidly approaching.
This means that from October 1 2021 - less than two months away - there will be checks on agri-food and feed documentation, with the next and main tranche of controls coming in on January 1 2022, and the final stage, covering live animals and low-risk plant products, being introduced in March 2022. Only then will the Brexit controls on UK-EU trade in both directions be fully in place. One significant problem, which already exists but will be exacerbated once import controls are in place, is a chronic shortage of the vets needed to undertake the necessary checks, itself caused in part by the end of freedom of movement of people.
Still later – in March 2023, it was announced this week – will the much-delayed Customs Declaration Service IT system be fully up and running (in the meantime, the antiquated and creaking CHIEF system [£] will remain in place). It wouldn’t exactly be surprising, given the history of government IT projects, including this one, if there were further delays. All these dates become the more remarkable considering that the entire Trade and Cooperation Agreement will be up for review after five years of being in force, meaning the end of 2025, whilst the Northern Ireland Assembly will vote on continuing consent to the Protocol in December 2024.
Although it may be that introducing import controls results in some significant disruption it would be better, as I’ve argued before, to see the effects of Brexit in terms of a slow puncture than a dramatic tyre blow-out. It will probably be like the immediate and visible effects of export controls (i.e. EU import controls), which have ‘settled down’ in the sense of beginning to make a long-term adjustment to trade being at lower levels than before. This has important political (non-)consequences, because, despite what some have expected and may still expect, there’s unlikely to be any ‘moment of realisation’ when public opinion registers the damage of Brexit.
Instead, there will be a gradual decline which, as with the current widespread reports of empty shelves and unpicked produce, causes inconvenience but probably no dramatic crisis (though some warn of it). The underlying issue of labour shortages means it will be the same story across many sectors, from construction to hospitality. But, because this isn’t a controlled experiment, it was always going to be hard to definitively explain the decline in terms of Brexit, and the pandemic makes that even more difficult. Even if it’s true that it is only the UK, and not EU countries, which is seeing these problems, that isn’t going to register with most voters.
Investment and regulation
Still less will the negative impact on foreign direct investment (FDI) in the UK register, although in the long-run that may be much more important than supply chain disruptions. Here again there will be debates amongst commentators and politicians about the role of Brexit but, as with UK-EU trade, the key point is that in what are inevitably multi-factorial issues the contribution of Brexit can only be a negative one. By definition it depresses UK-EU trade compared with not-Brexit, even if there is scope to argue about the precise extent, because it introduces new barriers to trade.
On FDI (not to be confused with overseas acquisitions of UK businesses, often by private equity firms, which is happening apace because of low company valuations caused in part by Brexit [£]) and related issues the only argument that Brexit would be beneficial is based on the creation of a more attractive regulatory environment. But, so far, ideas for what this would consist of have proved elusive, hence the recent TIGRR report was so anodyne.
The reason for this is that, despite years of propaganda to the contrary, neither EU regulation nor regulation in general have been major problems for UK business. Unsurprisingly, therefore, in a key industry often cited as a prime example for the advantages of regulatory freedom, financial services, recent regulatory reforms, whilst extensive, have not been radical (£). And, interestingly, despite the claims sometimes made about the ‘real agenda’ of Brexit, the government, at least for now, is resistant to removing the EU cap on bankers’ bonuses (£).
Conformity assessment
Meanwhile, as I’ve been flagging up since March, manufacturers, far from being freed from ‘red tape’, will have to implement the new UK Conformity Assessment (UKCA) registration and marking system in order to sell most goods in Great Britain from January 2022. This replaces the CE mark which will, however, continue to be needed to sell goods in the EU. The CE mark will also be valid in Northern Ireland, as will the UKNI mark (though not the UKCA mark) which can also be used by Northern Irish companies selling in Great Britain, but not in the EU, including Ireland, which will require a CE mark. There are also rules about the various combinations of CE, UKCA and UKNI markings that are permissible within different markets.
It’s exactly the kind of double (or triple?) regulatory burden that the single market abolished, and it’s also very unclear whether the UKCA assessment system will be up and running in time. Even if it is, it’s equally unclear whether firms will be ready. It is small firms which are most likely to struggle, as with the new trade barriers (of course it is also, itself, a new trade barrier but it will also affect those firms which only sell domestically).
Regulatory issues go beyond the generic one of UKCA registration, so that different industries and sectors face different challenges. A complicated example is the medical devices sector (which has secured an extension on the use of the CE mark until June 2023). An EU-wide system was still under development as Brexit happened, and the UK is set to develop its own system but it is not yet in place and it is as yet unclear how it will work. Another example is the huge cost to the chemicals industry (and, actually, beyond) of creating the UK REACH system in place of REACH, the EU system, which has also often been mentioned before on this blog, and has had quite a bit of media coverage (£). A sub-set of this is the particular problem faced by suppliers of biocidal products, which from the end of 2022 will have to achieve ‘GB Article 95 listing’ to supply the British market.
What all these examples, and many others that could be given, share is the basic issue that the UK/GB market in itself is relatively small, thus having its own regulatory system may simply make that market too costly to service, especially for smaller firms, and more costly for those who continue to do so. This in turn means it will be more difficult and costly – or in some cases simply impossible - for British customers to buy the goods they want. For example, the UKCA mark will be needed to sell goods in Great Britain but will not be recognized anywhere other than Great Britain, so the incentive not just for companies in the EU but anywhere else in the world to register is relatively small, and for some products may be tiny.
The bizarre irony is that, in many and probably most cases, it isn’t that actual product standards are set to diverge from EU standards and, quite possibly, they never will. It is that there are, or will be, different processes (and associated costs) of testing and registration in Great Britain and the EU (and Northern Ireland). Nor is this an inevitable consequence of Brexit or even of hard Brexit: it flows for the most part from the Johnson approach of prioritizing sovereignty above all else. So we pay a massive price – how much is hard to say, but just the cost to the chemical industry of UK REACH is estimated as £1 billion (£) - simply for the theoretical possibility of regulatory divergence.
Spending our own money
Apart from regulatory freedom, Brexit also promised freedom to spend ‘our money’ as we wished. So, going back to that notice about EU regional funding, the Brexiter response would be that it is only our own money being (partially) returned to us. This, of course, was the Leave campaign’s central economic case - the £350 million a week for the NHS. The idea was that all the EU funds for regional development, farming support, science and so on would still be available, plus a dollop on top. It was always (even stripped of the dishonest conflation of net and gross payments) a lie, because it treated the budget deficit as an entire cost-benefit analysis of EU membership. So, in fact, because of the overall effects of Brexit, none of that promised money exists. Instead, as for example Wales is currently finding, replacing former EU funds is a hit-and-miss battle within the context of general government spending allocations, as it was always going to be, for a share of a smaller pie than there would otherwise have been. Some may get lucky, others won’t.
Away from economics (although not without an economic dimension) it is only gradually that things like the end of participation in the Erasmus + scheme will be felt. A rather boosterish piece in the Sunday Times (£) extolled the “wider opportunities” of the UK’s replacement Turing scheme. But, aside from the perhaps limited attractiveness of some of the destination countries, the key fact that the scheme doesn’t guarantee tuition fee waivers means it is a far from adequate replacement. And whilst the UK will continue to participate in Horizon Europe, the EU science programme, the post-referendum experience of Horizon 2020, its predecessor, suggests that here, too, the UK will be in a worse place.
All of these impacts are to some degree tangible and measurable, even if that doesn’t translate into public awareness. And as the extraordinary ‘Kelemen Archive’ (the link is to item #754, currently the latest entry) documenting Brexit damage stories shows, they extend to almost every sector of British society and economy. Yet they do not exhaust the slow-burn damage of Brexit. That includes the many ways in which political conventions have been strained or broken, and political discourse made more toxic. It also includes the erosion of geo-political status associated with Brexit itself, as well as the reputational cost of the government’s serial dishonesty, especially as regards the Northern Ireland Protocol.
As regards the latter, having written at such length about it in several recent posts, and with events having temporarily quietened because of summer holidays, I’ll say no more except that playing with the stability and security of Northern Ireland is one of the worst aspects of what Brexit is doing. But, again, how much does it register with the electorate in England, at least?
Judgment day?
Although they didn’t mention it at the time of the referendum, it has become common now for Brexiters to say that the benefits of Brexit will not reveal themselves for years. That is convenient cover in all kinds of ways, including how it falsifies another Brexiter claim – made again recently by Dominic Cummings - that, by ‘taking back control’, the public will hold MPs accountable for systemic failings. There’s little chance of that if we have to wait 50, or even 100, years before passing judgment on Farage, Johnson, Gove et al.
Even if that judgment comes sooner, there seems very little prospect of some cathartic moment in which it becomes ‘received wisdom’ that Brexit was a colossal, historic blunder. It’s true that things can change – public support for Munich, Suez or Iraq dissipated more or less quickly – but it is possibly easier to recognize and admit foreign policy failures than those deeply embedded in domestic politics and cultural identity. It’s also true that these are, indeed, very early days and something – more likely something political, like Scottish independence, than something economic, like declining trade – could jolt England out of its apathy.
But for the time being I think it’s more likely that we will get gradually poorer than we would have been, living more restricted lives than we would have had, having more complex and burdensome regulation, and with our standard of living - in both economic and more extensive senses - slowly slipping behind those of other North and West European countries.
To re-iterate, no one lives in the counterfactual world in which Brexit didn’t take place. So although those of us who recognize what is happening will mourn our losses and rail against them, just as many, if not more, will deny the reality or be unaware of it, or simply – in one of the more endearing of English ways – mutter ‘mustn’t grumble’ and ‘it could be worse’ and settle down with a nice cup of tea.
That assumes that there is still tea in the shops, of course, despite supply chain disruptions. It would be strange if after all the World War Two nostalgia surrounding Brexit, Johnson found, as his hero Churchill knew only too well, that lack of tea might be the one thing to spell real trouble for the government.
I may not post every week over the summer – it will depend on whether there is any important or interesting Brexit news. If you want some holiday reading in its place, and haven’t read it yet, you might consider getting hold of my book! It’s called Brexit Unfolded. How no one got what they wanted (and why they were never going to) and was published by Biteback on 23 June 2021. It can be ordered from Biteback, or via other online platforms, as a paperback or e-book. For reviews, podcasts etc. see this page.
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