UK election offers voters no middle ground in December

Pity the poor UK voters as they prepare to vote in probably the most critical election of their lives.

As they battle the wind and rain to vote in the first December election for 100 years, they already know there are only 3 likely outcomes:

  • Tory majority, Brexit by end-January, EU trade deal uncertain
  • Labour majority, Brexit postponed, hard socialist agenda
  • Another minority government, outcome uncertain

The first option is less likely than the polls suggest, for the simple reason that Johnson will lose probably 40+ seats in Remain areas – to the LibDems in the South/London, and to the SNP in Scotland. To win, he therefore has to persuade large numbers of traditionally Labour Leave voters in the North/Midlands to vote Tory, for the first time in their family’s history.

President Trump’s proposed solution – an alliance with the Brexit Party – would avoid splitting the Leave vote and might gain the Brexit Party some Labour seats. But Trump’s personal unpopularity with most UK voters means his intervention on Friday is unlikely to help. Britons, like Americans, don’t like foreigners interfering in their domestic elections.

And then, of course, there are the dark arts of social media. Johnson’s chief of staff, Dominic Cummings, pioneered the UK’s use of these when running the Leave campaign.  Who knows what lies and half-truths will be circulated this time, and what impact they might have?

The second option depends critically on whether Labour can neutralise the Brexit issue by saying they will ‘trust the people’ with a second vote in a summer referendum – and not go into detail about the question that would be asked.

If they can, then their leader, Jeremy Corbyn, has a perfect opening for the old-fashioned campaigning at which he excels. He can simply attack the Tory record of the past 10 years and focus on issues such as the economy, climate change, the NHS and education, which are natural vote winners for Labour.

In normal circumstances, Labour would then be odds-on favourites to win.  But their leader, Jeremy Corbyn, has the lowest favourability ratings of any recent Opposition leader. He seen as an hard-line socialist and as weak on tackling anti-semitism in the party. As a result, the party struggles in the polls.

The 3rd option of another minority government includes a wide range of outcomes.  It could put the UK back in the chaos of the past 3 years, with nobody able to agree anything. Or, it could mean a second referendum on both Brexit and Scottish independence.

The key will be the level of LibDem support. Can they get to 75+ seats, and become ‘kingmakers’ along with the SNP and the other smaller parties?

Both Tories and Labour are vulnerable to them in Remain seats, due to their clear anti-Brexit policy.

Their focus on the characters of the Tory and Labour leaders is also a likely vote-winner.  But their problem is the UK’s ‘first-past-the-post’ electoral system, which usually means they win a lot of votes, but relatively few seats.

THE MAIN UK PARTIES HAVE ABANDONED THE MIDDLE GROUND
The problem for most voters is that there is no middle ground for them to choose, as in the past:

  • The Tory Party has swung to the right and is promoting English nationalism to avoid losing votes to the Brexit Party
  • The Labour Party has swung to the left and wants to overturn capitalism and adopt 1970s-style socialism
  • The LibDems and SNP agree on Remain, but the SNP also wants to break-up the UK

Johnson’s gamble depends on him winning a large number of seats from Labour to compensate for his losses in Remain areas.

Despite today’s poll ratings, Labour could therefore well take power as a minority government if they campaign effectively. The reason is that it is easier for them to do a deal with the other parties – by offering a referendum with a Remain option to the LibDems, and one on Scottish independence to the SNP.

Pity, therefore, the traditional middle-of-the-road Tory, Labour and LibDem voters,. They need to choose their ‘least worst option’ if they want to affect the result – Brexit, socialism or possible UK break-up. This would not be a great choice for a G7 country at the best of times. It would be even worse today, as an increasingly protectionist world slides into recession,

 

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’.

Wishful thinking dominates Brexit debate as the UK heads towards No Deal on 31 October

One of the best things I learned at school was the simple mnemonic:

“To ASSUME can make an ASS of U and ME”

Unfortunately, most of those involved in the UK’s Brexit debate have failed to remember it.  As a result, it seems likely that the UK will end up leaving the European Union on 31 October with No Deal.

The problem comes down to the set of false assumptions summarised in the slide above:

  • Don’t worry, history shows the UK won both the Battle of Waterloo and World War 2 by small margins – the Prussians arrived just in time to help win the Battle of Waterloo in 1815, and Hitler called off the Battle of Britain just before the RAF ran out of aircraft and pilots in 1940
  • The terms of the Withdrawal Agreement were only a bluff. German auto manufacturers will never allow their UK sales to be jeopardised.  And countries such as France, Italy and Spain will soon reverse course once they realise they might lose their UK tourist income
  • Everybody knows that Parliament would never allow a No Deal Brexit to take place, and so there’s no need to actually make the case for why it might be a disaster. After all, the Speaker said last week that he would probably allow an emergency debate if it ever looked likely
  • Company chiefs in favour of Leave have been prominent in the Brexit debate, but bosses who favour Remain would risk upsetting Leave customers if they did the same.  And anyway, everybody knows that in the end, someone will appear with a magic wand to make everything end happily

These are all arguments that have been heard everyday for the past 3 years.  The problem is that they are simply wishful thinking, and yet are never challenged.

The success of the Brexit Party in the European elections makes it almost certain that the next Tory leader will be a hard-line Brexiter.  As the chart shows from YouGov polling, most Conservative Party members (who will make the final decision) actually voted for the Brexit Party rather than the Conservatives in the election.

Similarly, it seems highly likely that No Deal will be the base case for most Tory leadership hopefuls.  And the position of Boris Johnson as front-runner is very clear, as the Leave.UK poster confirms.

Given that the leadership election is already underway, we also know how events will likely play out:

  • The new Tory leader will be elected in July, ahead of everyone’s summer holidays in August
  • Brussels will quickly refuse their demand to renegotiate the Withdrawal Agreement
  • The new premier will dismiss this as bluff during September and at the Party Conference
  • The UK will then leave the EU without a deal on 31 October

After that, either the new EU Commission will make a hurried phone call, saying it is all a terrible mistake.  Or the UK will find that 31 October was just “the end of the beginning”, and will instead start the lengthy process of negotiating a free trade agreement – whilst the EU implements their Preparations for a No Deal Brexit..

THE TIMETABLE FOR AVOIDING NO DEAL IS VERY SHORT
The key issue, as the independent Institute for Government (IfG) has noted, is that:

“A new prime minister intent on No Deal Brexit can’t be stopped by MPs.”

It is also clear from recent statements from Labour leader, Jeremy Corbyn, that he continues to regard a second referendum as very much a last resort, as The Guardian reported last week:

“Speaking in Dublin, the Labour leader said the only way to break the deadlock would be a general election or a second referendum after negotiating a softer Brexit deal with Brussels.”

Corbyn knows very well that a new Tory premier is most unlikely to seek a “softer Brexit deal”, and he also knows that it would be impossible to negotiate a new deal before 31 October.  It would be almost impossible even to organise a General Election before 31 October, as the IfG have also explained:

  • The election would have to be held by 24 October, as  the UK will otherwise leave by default on 31 October under the terms of the extension agreed under last June’s Withdrawal Act
  • The Fixed Term Parliament Act (FTPA) means the government would have to lose a second vote of confidence by 16 September to allow 25 days for campaigning, and 2 days for “wash-up” (deciding which bills can become law before dissolution)
  • The FTPA also mandates 2 separate votes of confidence, with a 14 day gap – so the 1st vote has to be held by 2 September ie the day that Parliament probably returns from its summer holidays

This tight timetable also raises an unanswered question as to when the vote of confidence would actually be tabled, if parliament is in recess?

Wishful thinking and wrong assumptions have dominated the Brexit debate. So there is little reason to assume anything will now stop the UK leaving on 31 October, in time for Halloween celebrations.

Afterwards, of course, everyone will be free to blame everyone else for “not making it clear what would happen”.  But that is always the result when wishful thinking is involved.

Most businesses were nowhere near Ready for Brexit last Friday – we mustn’t make the same mistake again

Thank goodness for backbench MPs and the European Union. Without their efforts, the UK would by now have left the EU without any trade deals, or ongoing relationship with it’s biggest export market.  And as the Duke of Wellington said in another context, “It was a damn close-run thing”:

  • In a historic vote, MPs decided by just 1 vote to force the government to ask for a longer extension
  • The EU Council argued into the night on its response, but decided to give the UK “a second chance”

The problem was well expressed in a tweet by former Brexit Secretary, David Davis, on Friday morning:

His tweet completely ignored the views of all the main business organisations and trade unions, who had spent weeks trying to point out that issuing government statements and Guidance Notes was not the same as actually being prepared, as The Guardian noted:

“Frances O’Grady, the general secretary of the TUC, and Carolyn Fairbairn, the CBI’s director-general, wrote last month before the crunch EU summit in Brussels: “Our country is facing a national emergency. Decisions of recent days have caused the risk of No Deal to soar. Firms and communities across the UK are not ready for this outcome. The shock to our economy would be felt by generations to come.””

On Friday, confirming their lack of understanding of business needs – and against the advice of senior civil servants – ministers decided to completely stand down No Deal preparations.  Yet as the independent Institute for Government have warned:

“Despite the delay, a No Deal exit is still very much on the table, either on 31 May or 31 October… Businesses and the public should not be left to read between the lines of individual departmental press notices.”

It is therefore critical that UK and EU27 businesses now take the opportunity of the extension to understand and prepare for the changes that will affect them if the UK does leave the EU.  For all the talk of a new referendum, this is still the law of the land.

Our surveys at Ready for Brexit have consistently shown that 80% of small businesses weren’t ready for Brexit. Some had stockpiled some essential goods, but only around one fifth had actually thought through a detailed plan.  As a result, many people have had sleepless nights in recent weeks as they realised the UK might well be leaving with No Deal.

Now that the UK has an extension, it is time to stop panicking and start preparing. None of us can afford to be complacent – No Deal remains the default position and businesses need to know how Brexit will affect them in key areas for their future:

  • Customs, Tariffs and Regulations.  No one has needed to fill out Customs Declarations for EU trade for 25 years. HMRC has warned that following Brexit, businesses may need to make 400 million Customs Declarations at an expected cost of £32.50 each. Compliance with Rules of Origin could easily cost more, if legal advice is needed. Companies need to identify how Customs and Regulatory requirements could impact their business and plan to put the correct procedures in place
  • Supply Chains.  Will your business be affected by interruptions in supply chains following Brexit? You need to audit your supply chain partners to identify potential weak links. It only takes one missing item to shut down a production line. And think about what may happen to your cash flow if forecast delays take place at the ports
  • Sales Agreements.  Do you have Material Change clauses in your commercial contracts?  You need to check out key areas such as your ability to pass on the costs of tariffs, customs delays and exchange rate movements, as well as the impact of possible regulatory changes. Governing contract law also needs checking as the UK will no longer be a member of the EU
  • Employment. You need to understand how the status of UK-employed EU citizens may change and check out the position of UK staff working temporarily or permanently in EU countries. Don’t forget basic areas such as whether professional qualifications obtained in the UK will still be valid in the EU after Brexit, and the possible need for international driving licences

We have all had a lucky escape in the past few days. But we can’t rely on our luck holding.  Planning now for whatever may happen in the next few months may well save you months of heartache later on.

This is why, with some highly experienced colleagues, I helped set up Ready for Brexit.  As I wrote here in June:

“We are particularly concerned that many small and medium-sized businesses (SMEs) – the backbone of the European economy – are failing to plan ahead for Brexit’s potential impact.”

We can all hope that politicians now step back, and work together to avoid the disaster of a No Deal at the end of May or October.

But hope is not a strategy – particularly when the future of your business may be at stake.  If you need detailed help in the form of Brexit Checklists and planning tools, they are all there on the Ready for Brexit site.

 

Businesses thrilled by Brexit uncertainty: “It’s exhilarating” says small business owner

With the European Commission saying that a No Deal is now “likely“, small businesses across the UK and EU27 have begun to look forward to the opportunities that it will create, as this 1 April report from Ready for Brexit suggests.

Businesses across Europe are thrilled by the uncertainty of Brexit. “We’re absolutely loving it” said Colin Potts, whose Wolverhampton based company exports wall brackets. His wife and business partner Brenda agrees. “Because we mostly export to the EU, I’ve never had to fill in a customs declaration before – it’s something new and you know what they say, a change is as good as a rest,” she said.

In the event of a No Deal Brexit, UK/EU27 businesses will need to fill in an extra 400 million customs declarations a year, but that doesn’t faze Brenda. “Wow, 400 million! It’s exhilarating to be part of something that big”, she gushed. “As a small business owner, I have plenty of leisure time and am often bored. This is what I am looking for to fill those long empty hours.

Pete Micklethwaite, who owns a road haulage company in Doncaster is also excited. “Will there be a deal, won’t there – it’s creating a real buzz. If there’s no deal our drivers will need three separate driving licences for some of our longer jobs and looking on the bright side, you can never have too many photo IDs.

The EU nationals in Pete’s team aren’t missing out on the excitement either, he explains. “One of our longest serving drivers, Jim, who’s from Romania, asked me the other day whether if he sets off on a job on the continent he’ll be allowed back in. Some people take up gambling for that kind of thing but our lads just need to come to work, if they’ve still got jobs!

“Some of the doom merchants were saying that we needed to be ready for a so-called cliff edge on March 29, but now we’ve got at least two weeks longer than that,” mused Brenda Potts. “These naysayers have obviously never run a small business and don’t understand the grinding boredom of being able to plan ahead.

The opportunities of a No Deal Brexit aren’t passing haulier Pete by either. “A guy I know got involved with a ferry company with no ferries and still landed some big contracts. When he told me about it I had to check the date to make sure it wasn’t an April fool but it wasn’t. Now that’s entrepreneur-ship.”

 

If  you’re worried about the impact of a No Deal Brexit on your business, download the Ready for Brexit No Deal Survival Kit