No Deal Brexit still a likely option if opposition parties fail to support a new referendum

Canada’s normally pro-UK ‘Globe and Mail’ summed up the prevailing external view of Brexit last week:

“We begin this editorial with an apology to you, our faithful readers. In March, we described the Brexit situation, then careening through its third year and nowhere close to resolution, as an “omnishambles.

“An omnishambles is a state of utter chaos, total disorder and perfect mismanagement – which brings us to our apology. If you’ve been paying any attention to British Prime Minister Boris Johnson, you know that, in declaring United Kingdom politics to have reached peak shambolic six months ago, we spoke too soon. Oh, did we ever.”

Within the UK, most people are totally confused by the mixed messaging surrounding Brexit.  Was it effectively postponed again when Parliament passed a law meant to stop No Deal? Or is it all still going to go ahead – deal or no deal – on 31 October, as the prime minister insists. Nobody knows.

There has also been no debate about what kind of policies should be pursued after Brexit. Instead, the media has often focused on the influence of  Johnson’s chief of staff, Dominic Cummings (pictured above, in casual dress).

Cummings led the Leave campaign under Johnson, and continues to carry out Johnson’s strategy today.  And whether by accident or design, his apparent fondness for tee-shirts also seems to be proving a useful tactic for diverting media attention away from discussion of potential food shortages.


Behind all the spin, Johnson’s strategy is simply responding to the opinion polls above.  He knows he has to win back Brexit Party voters if he wants to win a General Election.  Understandably, therefore,  he is going hard for the exit, declaring that he’d “rather die in a ditch” than leave after 31 October.

“Luckily” for him, he is up against Jeremy Corbyn – my local MP – who has completely failed to present a coherent policy on Brexit.  And Johnson has exploited this position by focusing on the Opposition’s continued failure to answer the critical question – “what would any extension be for?

It seems the Liberal Democrats will finally come off the fence under their new leader, Jo Swinson, and decide to campaign to remain in the EU. But we will have to wait to see if Labour’s Conference can force Corbyn to abandon his long-standing opposition to the EU.

If not, it is quite possible that the EU27 could refuse the extension request at next month’s Summit, if it doesn’t seem likely to lead to a second referendum or a new government.

Germany’s Chancellor Merkel has already set out her belief that Johnson wants to convert the UK to a form of Singapore-on-Thames. with a low tax, light-touch regulatory environment in direct opposition to the rules of the EU Single Market.

3 alternative and quite different scenarios therefore exist for the Brexit endgame:

  • No Deal. Johnson finds a way round Parliament and the No Deal Act, and leaves without a deal on 31 October. He then campaigns on the theme of ‘The People v Parliament’ and blames Parliament for blocking his hopes of getting a deal
  • 2nd referendum. The opposition parties threaten to install an interim government that would replace Johnson, and ask the Summit for an extension to allow an election and 2nd referendum.
  • ‘Plan B’.  Johnson understands the value of contingency planning.  Given his key policy is to leave on 31 October, he is already exploring the opportunity for a deal on the basis of accepting the EU’s proposed N Ireland-only backstop option.  He could then still campaign having (a) achieved a deal and (b) left as promised.

At the moment, Johnson clearly sees No Deal as his best option, as it means he doesn’t have to compromise.  So it is no surprise that the Foreign Secretary has warned they will “test (the No Deal Act) to the limit”, in order to leave on 31 October without a deal.

The compromise of a Plan B would clearly lose him DUP and Brexit Party votes.  But it might offer Johnson his best chance of staying in office, if the Opposition did agree to push for a new referendum. It would be humiliating, to say the least, if his term in office proved the shortest in history.

The next few weeks may therefore compel the ‘Globe and Mail’ to issue yet another apology to its readers.

 

UK, EU27 and EEA businesses need to start planning for a No Deal Brexit on 31 October

New UK premier, Boris Johnson, said last week that the UK must leave the EU by 31 October, “do or die, come what may”.

This means UK, EU27 and EEA companies now have less than 100 days to prepare for a UK No Deal Brexit. That’s less than 70 working days – and even less if you plan to take a holiday over the summer.

If the UK leaves without a deal, it will also leave the Single Market and the Customs Union. So everything will change overnight – 400 million Customs Declarations will likely be needed each year, plus compliance with Rules of Origin and thousands of other major/minor regulatory changes.

Of course, it is still just possible that the UK might change its mind. Or that the new UK government might persuade the EU27 to give up the so-called “Irish backstop”. This aims to avoid the need for border controls between Northern Ireland and the Republic of Ireland.

But neither outcome looks very likely today.

THE AUTO INDUSTRY IS ALREADY WARNING OF THE RISKS AHEAD 
Businesses therefore now need to prepare for a No Deal Brexit on 31 October.

What does this mean?  It means that companies have to assume there will be no transition period. Instead, the UK will operate under WTO rules.   The UK car industry has highlighted the risks this creates in a letter to the new premier:

“We are highly integrated with Europe, and a no-deal Brexit would result in huge tariff costs and disruption that would threaten production, as well as further undermining international investors’ confidence in the UK. We need a deal with the EU that secures frictionless and tariff free trade.

“A no-deal Brexit presents an existential threat to our industry.  Above all, we must ensure the sector continues to enjoy — without interruption — preferential trade with critical markets around the world, including the EU”.

The chart above highlights the potential impact on the Nissan car factory in NE England.

THE NEW UK GOVERNMENT IS NOW PREPARING A MAJOR COMMUNICATIONS CAMPAIGN

Cabinet Office minister, Michael Gove, has been put in charge of No Deal preparations. And the aim is to quickly launch a major communications campaign to help the public and businesses get ready for leaving the EU without an agreement. As Boris Johnson said last week:

“What we will do, is we will encourage people in a very positive way. From the get-go, we start saying, ‘Look, what do you need, what help do you need, what reassurances do you need?’”

This will add to the information already available by clicking on the Gov.uk website:

READY FOR BREXIT PROVIDES PLANNING AND AUDIT TOOLS, PLUS DETAILED LINKS  

A No Deal Brexit will impact companies and supply chains.  This is why I co-founded Ready for Brexit a year ago, with a number of highly-experienced industry colleagues. It is subscription-based, and features detailed Brexit checklists, a No Deal Brexit planning tool and a BrexSure audit tool to check your suppliers and customers are also fully prepared.

It focuses on the key areas for business, as our Brexit Directory above shows:

  • Customs & Tariffs: Export/Import Registration, Labelling, Testing, VAT
  • Finance: Payment Terms, Tax & VAT, Transfer Pricing
  • Legal: Contracts, Free Trade Agreements, Intellectual Property
  • Services & Employment: Banking, Insurance, Investment, Property
  • Supply Chain: Documentation, Regulation, Transport

We can all hope that Johnson’s renegotiation with the EU27 is successful. But hope is not a strategy.

With the new government committed to the 31 October deadline, businesses really are taking an enormous risk if they don’t focus all their energies on planning for ‘No Deal’.