Our Challenges Post-Brexit

Post Brexit is a phrase I dislike but it’s one we increasingly have to use.

In March 2019 - a mere 18 months away – the UK will leave the EU. Divorce will follow a rocky 45-year marriage and it’s all beginning to look a little messy.

Brexit appears to bring out the worst in us all.

Leavers chomp at the bit and demand the immediate implementation of the ‘will of the people’. Remainers resist, speculating fears and unknown consequences. The referendum result was so close that calls for a second plebiscite grow daily.

There is intolerance in the national discourse and - whilst angst and anger does seem to be a global phenomenon - it’s hard to identify a time when Britain was so fundamentally fragmented.

Everyone is talking but no one is listening.

You may need to go back to the roundheads and cavaliers of the 17th century to find such fundamental division. Civil war will not happen but the UK does face the greatest existential challenge since it was created, in its current form, in 1922.

The decision taken in the 2016 referendum to leave the EU surprised most people. Few saw it coming.

At the time, officials in Singapore commented, “it is not often you see a country commit economic suicide.” Ouch.

Within days the government, like sterling, had collapsed and the Singaporean prognosis seemed to becoming reality.

Yet, over the following months, little happened.

The economy glided into calmer waters, growth continued, employment rose and the world continued to turn as it normally does.

At Marketing Derby we didn’t see any significant decline in investment enquiries - indeed our major city employers have been busy winning orders and announcing new investments – and there is currently a record number of planning applications being submitted for new city projects.

So, is well then? Has short-term post-referendum panic been replaced by business as usual?

Well, not quite.

What might be described as the ‘phony war’ phrase appears to be over and the reality of negotiating our way out of the world’s largest economic club and into a myriad of bi-lateral relationships is kicking in.

The clock is ticking and the pesky detail of trade, customs, borders and migration, are all lining up for serious attention that demands solutions far beyond the polemic we have been fed by both sides to date.

The pressing of the article 50 button, the snap general election and worsening economic data – growth slowing, inflation rising - have all conspired to make March 2019 loom ever closer. It will soon be Christmas and just think how it immediate Brexit will seem when we return to work in January.

The biggest threat to any economy is uncertainty that will result in delayed investment decisions until the political and economic roadmap is clear.

Unfortunately, government machinery doesn’t turn quickly - we have waited 50 years for a decision on Heathrow, apparently it will take 5 years to fix Big Ben – yet, the most complicated political agreement in our history needs designing and signing with 27 countries and all within 500 days.

Pigs will fly before that happens which is why EU-Brexit transition is suddenly flavour of the month.

If – as part-Derbeian Samuel Johnson one said – patriotism is the last refuge of the scoundrel, then long grass is the refuge of the bureaucrat. They love to kick the can down the road.

There is no doubt that transition will give breathing space for the knitting of complicated deals but its danger is the extension of uncertainty.

It’s a classic choice between the rock and the hard place – a short, sharp shock and peril of falling off a cliff-edge, versus a softened timetable, with danger of economic torpor.   

What strikes me as strange is that the whole negotiation process to date seems to be that the UK is seeking to leave a club whilst trying to keep as many of the club membership benefits as we can – access to the single market, frictionless customs, no hard Irish border etc – but, without paying a fee.

I am unaware of any club – sporting, social or cultural – that would even contemplate such a proposal.

The reaction of some to this is to say, let’s accept we are leaving and just leave. The UK is the world’s 5th largest economy and we can row our won boat.

Sometimes called hard Brexit, other times Empire 2.0, the official term is now Global Britain. The philosophy is simple - it’s a great big world out there, we’ve done it before and we can do it again.

There are two key challenges to this.

First, more that half of our economy is currently traded within the EU club -  £290bn as opposed to £229bn with the rest of the world - so any loss will need replacing elsewhere and all economists accept there will be some.

Second, a trade deal is a two way street. At the moment potential trade deals are being talked of as free tickets to prosperity, an opportunity to sell our goods to others. Seen from the other side, these deals are an opportunity to sell their goods to us.

Take the biggest deal, which is likely to be with the United States.

Today, we sell more to the US than they sell to us - something like £39billion a year. A new, non-EU, UK-US deal is seen across the pond as an opportunity to close this gap, perfectly fitting Donald Trump’s ‘America First’ policy. The recent chlorinated chicken controversy was brief insight into the reality of how this will work.

The view is similar in countries such as China, New Zealand and India – all of whom see deals with post-Brexit UK as opening the market for their exports.

To counter this, we will need a step-change in our own export abilities and we need to ask ourselves some tough questions.  

For example, Germany’s exports to China are currently eight times greater than the UK’s. If we double our trade with India, it will still be a smaller market for us than Belgium.

Brexit has been interpreted by some as the rise of the little Englander – an attempt to stop the world and get off, or an opportunity to recreate empire.

I’m all for a global, outward-facing, internationalist Britain. We should be selling more to the Chinas and Indias of the world, but every sell has to be hard won.

Brexit or not, the UK needs to develop an educated, internationalist workforce, open, engaged and confident on the world stage. We will need to invest in businesses designing products the rest of the world want to buy and then support these companies on their difficult export journey. 

The challenge is huge.