Winner of the New Statesman SPERI Prize in Political Economy 2016

Wednesday, 11 October 2017

The myth of No Deal

It suits the government to keep talking about the possibility of No Deal for as long as the first stage negotiations continue, for three reasons. First, there is of course the remote possibility that the other side will believe it and make some concessions to avoid it. Second, as concessions are made on the UK side, it becomes a palliative to Brexiteers: maybe the Lion will roar in the end. Third, when the deal is finally done, the collective response might be relief that No Deal has been avoided rather than indignation at the terms.

But how can I be confident that No Deal will not actually happen? First, there has as yet been nothing done to prepare for that consequence, as Chris Cook outlines. Now you could rightly respond that this government is not known for its rational planning so this means little. But the lack of planning means that No Deal will bring UK chaos: not just firms leaving or going bust but highly visual dislocations like lorries clogging up ports and motorways. It would look like total economic incompetence, like Black Wednesday on steroids. It might mean the Conservatives lose not one but two or three general elections.

That is not the legacy that May wants. The second reason No Deal will not happen is that she wants to be remembered, despite everything else, as the Prime Minister that got the deal done without destroying her party. The only way I can see of that not happening, given the pro-Brexit nature of Conservative Party members, is if she is unseated by Brexiteers. 

The chaos argument still applies. So those who try to remove May before a deal is done will be putting the terms of Brexit above party loyalty: not something you normally associate with Conservatives, but as Raphael Behr argues that is just what many Brexiteers might do. (An exception is surely Boris Johnson, who sees Brexit as his route to power and would prefer the safer route of the inevitable leadership election after the deal is done.) But they would need good cause, and the details of citizens rights, the divorce bill or even the terms of transition seem unlikely to be enough. What could trigger a revolt is if the EU presses the border issue at the first stage as I outlined here, forcing May to agree to stay in the customs union permanently or more likely abandon the DUP. Even then, there may be enough Remain MPs to block the challenge or enough members may choose to compromise rather than risk electoral oblivion.      

Yet although No Deal is very unlikely to happen, it will remain a myth long after the deal is done. It will become the excuse used by Brexiteers for why the post-EU period turns out to be no better and perhaps worse than its predecessor. If only we had ‘true Brexit’, they will say, things would have been different. Ironically a deal is useful to Brexiteers in that it gives them a story for why the sunlit uplands that they described during the referendum campaign did not come to pass.

However we should still be concerned about No Deal rhetoric for the following reason. If you were the head of a firm having to decide to make an investment which would lose money if there was No Deal, would you have the confidence based on the analysis above to go ahead with that investment right now? I think you would be far more likely to postpone until you saw what happened. In addition there are all the EU nationals in the UK who continue to face a horrible uncertainty about their status under No Deal, as well as the prospective EU immigrants who will not come for that reason. Talk of No Deal, even if it is cheap talk, has real economic and social costs.    

9 comments:

  1. I am skeptical about your dismissal of No Deal.
    There are two reasons to support no deal: you believe it's the best option or you believe you can blame someone else...

    Given that conservatives were able to blame Labour for austerity, I would bet they believe they can blame the EU for any disruption from No Deal...

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  2. I can't agree that No Deal is unlikely to happen. It seems to me that any agreement will require compromise and compromise is agreement by mutual concession.

    From what I can see we have had no concessions from the EU who keep saying "No" and are only prepared to strike a deal on the basis of their terms. I cannot see May coming back to the people and having to admit this; it is one thing for Cameron to come back and say that he's achieved X, Y and Z concessions which amount to nothing; for May this would be a far more serious final defeat which will affect the country for the next forty years. There "appears" to be no planning for a hard Brexit but I cannot believe that none has been done as this has always been a possibility, given the nature of the EU and the stakes involved.

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    1. To be blunt, the EU holds all the cards. They have little reason to cooperate or concede to May, particularly given her less than diplomatic rhetoric prior to the June election.

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  3. As an outsider this talk of no deal and "planning for all contingencies" leaves me an impresssion May is winging it with no coherent plan. Certainly her ministers are less than inspiring, particularly that straw-thatched meshuggener. In an admittedly dysfunctional way it's comforting to see that it isn't just the US suffering lack of competent leadership.

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  4. Here's the thing with that argument though - could parliament deliver No Deal without May explicitly wanting it?

    Suppose the government negotiates a deal that includes painful provisions to the left, and puts in a Deal or No Deal vote to parliament. Will Labour vote for or against? Will Corbyn convince himself that the public will blame the Tories for whatever happens and vote against the deal together with Brexit tory rebels?

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  5. German Industry has already been warned to plan for a hard BREXIT
    http://www.dw.com/en/prepare-for-very-hard-brexit-german-industry-group-warns/a-40822062
    Rupert Murdoch’s advocacy of many years standing for the UK to sign up with NAFTA has finally emerged from the shadows. Again from Deutsche Welle. “With Brexit day coming in 2019, British ministers are exploring the options if the world's fifth largest economy drops out of the EU without a clear trade deal.
    Joining NAFTA would allow the UK to boost trade with three of the world's economic powerhouses, which have a combined GDP of €19 trillion, compared with the EU's GDP of €17.5 trillion. Britain, the US, Canada and Mexico account for more than 30 percent of the entire global economy.
    "We are confident that we will find a deal that works for Britain and Europe too. But it is our responsibility as a government to prepare for every eventuality, and that is what we are doing," the ministry spokesman said.”
    My own observations are that David Davis is giving a masterful exhibition in the art of appearing to negotiate when not so doing. I did wonder initially whether that might be because he carries no negotiating brief due to the divided politics of his Government but it co7ld just as easily be because true policy lies in an entirely different direction.

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  6. I am still confident in my power with responsibility thesis, in which the newspaper industry that backed Brexit comes to own the shambles that will be created in the near future.

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  7. Isn't the other crazy thing about 'No Deal' is that it will lead to a period of deals? We might revert to WTO tarrifs, but we will still need to do deals, deals and more deals if we want to stand a chance of some economic hope.

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