As the U.K sees the deadline for a Brexit deal slip to the back-end of November, the question on everyone’s lips is whether Theresa May’s government will even survive that long. It was always going to be a rocky time for her administration following Parliament’s return from the summer recess, but few could have imagined it would culminate in the prospect of a general election and a second referendum.
Brexit Secretary Dominic Raab is trying, albeit unconvincingly, to cling to the hope that a deal can still be struck (with the raft of no deal papers prepared, of course, and waiting in the wings). He declared the economic chaos anticipated to follow a no-deal situation was ‘scaremongering’ and likened it to the Project Fear prediction tactics used by Remainers in the Brexit referendum. However, a recent Ipsos MORI poll revealed only 45% of Conservative voters think Theresa May can secure a good deal, if any deal at all, and this sentiment is most likely mirrored and intensified across the country.
As if her own party flocking away from her Chequers plan in droves wasn’t bad enough, the Prime Minister was forced to watch former Brexit Secretary David Davis and Conservative hard-line Brexiteer Jacob Rees-Mogg cosying up to Nigel Farage, former UKIP leader, at the weekend.
At the Labour Party conference in Liverpool her government also drew criticism from business groups after the migration advisory committee said that lower-skilled workers should not be able to get permits to work in the UK after Brexit. It was also criticised for adding that higher-skilled workers from the EU should not get preferential treatment over those from outside the EU.
She is now preparing for her own conference, which starts in Birmingham at the weekend, where she will be forced to evaluate the remaining options for her party. With the Labour Party’s assumed new openness on options around Brexit, the question now is whether the country ends up breathing a huge sigh of relief if the opposition chooses to offer a second referendum.
The view from Europe
May was able to achieve very little at the informal EU summit in Salzburg last week. Firstly, the European Council and Commission presidents Donald Tusk and Jean-Claude Juncker gave May a hard time. Meanwhile, Malta and the Czech Republic called for a second referendum, and Germany and Brussels remained fairly intransigent.
Finally, Emmanuel Macron accused the Conservatives of lying and put pressure on May to break the deadlock on Northern Ireland and the future trade deal. The French President has called on Europe to remain true to the “clear principles of the single market”, which inherently contradicts May’s Chequers plan to see close trading ties on goods, but not services.
Labour’s 2nd referendum flag flying high…
While one party appears to be somewhat in turmoil, it would appear that Labour’s announcements from the last conference on Brexit is finally beginning to deflect attention away from the accusations of anti-Semitism that have been hanging over the Party – and Corbyn in particular – all summer. Labour’s party faithful cheered when the Shadow Brexit Secretary Sir Keir Starmer announced the possibility of sanctioning a second referendum at the Labour Party conference, and this sentiment is echoed by remain voters across the country. The question here is whether Labour’s Northern strongholds would support a u-turn.
Starmer also says the new relationship between Britain and the EU must be based upon “partnership” and should begin with a comprehensive trade agreement as well as continued cooperation on science, security, research and technology. Starmer said: “The biggest danger currently facing British businesses, jobs and living standards is the chance of the Prime Minister exiting the EU without a deal.”
He subsequently set out Labour’s six-point threshold test for the Brexit deal, which is as follows:
- Does it ensure a strong and collaborative future relationship with the EU?
- Does it deliver the “exact same benefits” as we currently have as members of the Single Market and Customs Union?
- Does it ensure the fair management of migration in the interests of the economy and communities?
- Does it defend rights and protections and prevent a race to the bottom?
- Does it protect national security and our capacity to tackle cross-border crime?
- Does it deliver for all regions and nations of the UK?
While Labour hasn’t got a magic bullet on the Northern Ireland border question, its mandate seems positive, distinctive and chiming more with its European compatriots and the electorate at large, in particular its core economic and trade policy planks remain aligned with Europe.
Brexit’s economic drag continues
Amid all the political wrangling, there is now less than six months to go until Britain leaves the EU, and the Organisation for Economic Cooperation and Development (OECD) has warned that the UK will be stuck in the slow lane, hard Brexit or otherwise. The worst case sees Britain crash out with estimates of some 3% wiped off our GDP – equivalent to about £60 bn – over two years.
Monthly GDP growth statistics (ONS statistics out on 10 October) are likely to show faltering growth, with only Italy achieving lower growth rates than Britain among the G7.
The housing market also continues to see prices slip – especially in London (watch for this month’s crop of house price indices including those from Nationwide on the 2nd,, Halifax on the 5th, Rightmove on the 15th and RCIS on the11th., This will be followed by the ONS on the 17th, plus we will also see mortgage lending trends statistics from UK Finance in mid-October, alongside weekly mortgage applications survey data from the Mortgage Bankers Association).
Meanwhile, consumer confidence is likely to remain depressed, with a clearer picture coming from Barclaycard’s quarterly Consumer Spending Data on the 9th, and the Bank of England credit conditions report – 11 and the VISA UK Consumer Spending Index out on the 11th and the 15th respectively.
Labour’s Command Economy?
Aside from Brexit, it’s worth now seriously evaluating what a Labour government would mean for the economy. John McDonnell, Labour shadow Chancellor of the Exchequer, has now set out an ambitious far-reaching industrial strategy and economic reform programme. A mixture of initiatives, it includes the following:
- nationalisation of the water industry in England, which would be the first to be re-nationalised under Labour, alongside plans to nationalise the railways, energy and mail industries “inclusive ownership funds”, worth up to £500 for members annually (akin to the John Lewis model)
- a Public and Community Ownership HMT unit (bringing PFI contracts in-house)
- a Fair Tax Mark standards company charter
- an international forum to deal with future economic crises
- higher quotas for women on boards
These reforms might be both good and bad for Britain, but there is no escaping the fact we may indeed be facing the prospect of returning to the command economy of the 1970s. Nonetheless, there are many unanswered questions over whether this would be the right solution to Britain’s political and economic woes.