Britain will be leaving the European Union in just ten months’ time. In the event that the UK government cannot reach a deal with the remaining EU members, Britain’s exit could be abrupt, since “nothing is agreed until everything is agreed.” That means no transitional period, no customs union, no passporting rights for financial services. In March 2019, the UK could be unceremoniously dumped onto World Trade Organisation rules with no trade agreements negotiated with anyone.
For the 48 percent of Britons who voted to remain in the EU, Britain’s looming exit is cause for increasing anxiety. The same, however, does not seem to be true of government itself. There has been no serious effort to recruit the customs officers that will be needed next year if no EU deal can be reached. Nor has government drawn up the compulsory purchase orders that will be necessary to buy up the land adjacent to ports and airports to create the new customs and passport-control facilities that will be required.
Meanwhile, the Department for International Trade has yet to get around to finding out what a trade deal is, still less how to negotiate one. As Adam Payne at Business Insider reported recently, even the EU Commission is worried about the UK’s competence at negotiating its future trade deals:
“One of the tasks facing Britain is to ensure the free trade deals it already has with other non-EU countries, as part of its EU membership, continue to apply after it has left the bloc.
“However, the Commission — led by President Jean-Claude Juncker — has told the EU’s other institutions it is ‘deeply concerned about the UK’s incompetent handling of trade deal rollovers,’ and [Trade Minister, Liam] Fox’s ‘failure to grasp basic concepts and trade-offs’…
“One former senior UK government official told BI they were not surprised the Commission was worried. ‘As it should be,’ they said. ‘Frankly, they’ve [DIT] been messing around for months and not doing any of this. Most of the people who are having to deal with this are totally ignoring reality’.”
It is almost as if the government has no intention of leaving the European Union and is merely stalling for time in the hope that someone will rescue them from the mess they have created for themselves.
Nor is evidence suggesting that the UK government isn’t serious about Brexit limited to the (lack of) actions on the part of the state. The City of London banks have also taken a relaxed – to the point of being asleep at the wheel – approach to Brexit. Bearing in mind that the banks stand to lose billions of pounds if they suddenly find themselves outside the EU without a trade deal that covers financial services, we would expect to already see a decline in new cross-border lending in London. However, according to Mark Whitehouse at Bloomberg:
“A couple of months ago, I looked at the volume of cross-border bank lending originating in the U.K. – a sort of indicator of the country’s, and particularly London’s, standing as a global financial hub. The data showed exactly the opposite of what one would expect if banks were worried about Brexit: The volume of lending from institutions located in the U.K., both domestic and foreign, had increased since Britain voted to leave the EU.
“Given all the noise financial institutions have made about moving out of the U.K., this seemed odd. So when the Bank for International Settlements released data for the last quarter of 2017, I checked again. The result: Cross-border lending from the U.K actually increased by another $181 billion – the fastest pace since before the 2008 financial crisis.”
It would be a mistake to believe that the banks are somehow out of the loop on Brexit; or that they do not have influence over the UK government. As Jon Stone at the Independent reminded us recently:
“The Conservative party is heavily reliant on large cash donations from hedge funds, bankers, and magnates to fund its campaigns, according to a new analysis of the party’s finances.
“Since the 2015 general election 18.6 per cent of all donations to the party – totalling £8.4m – have come from hedge funds or people associated, while 6.5 per cent or £2.9m have come from investment bankers and the finance sector in general.”
Moreover, there is a British tradition of government ministers moving on to sinecures in the banking and financial sector as a reward for their pro-finance actions in government. You can be pretty sure that the Prime Minister and her cabinet colleagues have been made painfully aware of what is required of them by their corporate paymasters. The real question is whether they have the ability of deliver it. As Whitehouse notes:
“Of course, the exodus could still begin when the U.K. figures out how Brexit will actually happen. But all the government’s efforts at coming up with a plan seem only to demonstrate what a mistake it would be. Perhaps bankers sense something that the country’s leaders have yet to fully recognize.”
The combination of government inactivity and financial sector complacency certainly suggests that the UK government is seeking some mechanism to deliver BINO (Brexit in name only). So the real question is whether they can get such a deal past the Hard-Brexit Ministers and MPs that the government depends upon to remain in office.
As you made it to the end…
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