Inside Story

Brexitannia: a state in limbo

Britain is paralysed by its decision to leave the European Union, says David Hayes

David Hayes 16 August 2016 3611 words

Where to? Theresa May in Berlin for talks with chancellor Angela Merkel last month, during her first overseas visit as British prime minister. Tom Evans/Number 10

Britain is on hold. And so, too, is the European Union. Like a couple forced to live together for a long but undefined period after one partner has announced a wish to leave, both sides face the prospect of negotiating a settlement in circumstances where emotions are bruised yet interests are entangled and compromise essential. Whatever the future holds, the outcome mustn’t be zero-sum.

There are also deep complications within each side. Europe’s loss of its second-largest economic power is bound to be painful. Even before Brexit, the bloc of twenty-eight members was mired in worries over migration, terrorism, populism, Russia and the eurozone. Elections next year in the Netherlands, France and Germany will test the political centre in these key countries, and perhaps roil the Brexit process. The EU’s competing instincts, to seek an amicable deal but also make it sufficiently hard in order to deter further schisms, will need to be balanced.

Britain’s internal divisions further cloud the picture. After the referendum, the central quarrels – over economics, sovereignty, immigration and security – persist. Many “remainers” qualify their acceptance of the verdict with the charge that it was secured by impossibilist promises, even outright lies. Some look ahead to a re-run of the vote. More hope that a complete breakaway can be modified by joining the EU-plus’s single market, formally the European Economic Area, or EEA, or its affiliate the European Free Trade Area, or EFTA. But in either case, trade-offs over the free movement of labour – agent of large-scale immigration to Britain since 2004 – would be needed to satisfy “leavers.”

Many of the latter, deeply suspicious of any compromise with reality, hail the plebiscite as a once-and-for-all decision. They want to press on with fulfilling the people’s expressed wish without delay. Asked “Should the United Kingdom remain a member of the European Union or leave the European Union?,” after all, 52 per cent ticked the second box. A favoured option is to repeal the European Communities Act of 1973, which sanctioned the UK’s entry to the then six-member club, though such a bazooka would nullify the mountain of secondary legislation and court judgements passed since then: a recipe for chaos. Not that that is any deterrent to hardline anti-Europeans.

This ongoing fallout involves a certain psychological dislocation. The result on 23 June was a profound shock for everyone. For all the sustained animus the EU attracted during the forty-three years of British membership, especially from the press, exiting always looked unlikely. Almost independently of politics, an assumption of permanence had taken root. That shaped attitudes: complacency and superiorism among defenders of the status quo, frustration and resentment among attackers.

Now, the roles are reversed, though with no surety about what precisely happens next. It will take at least two years for the terms of Brexit to be agreed. In the vacuum, former combatants wander the battlefield nursing their wounds and looking to continue the scrap. Defeated “inners” (or the self-styled “48 per cent”) highlight the absence so far of any of the juicy benefits dangled by the “outers.” Some rally in favour of a second vote. A demonstration is planned in September, and the cause is backed by the New European, a pop-up newspaper seeking legs. Those on the winning side scorn the argument for a re-run as undemocratic and the work of bad losers, greet any positive economic morsel with acclaim, and tell the losers to stop “talking Britain down.”

There is a perverse logic to these sour exchanges. In a campaign dominated by outlandish claims and dubious statistics, both sides shied away from the mechanics of any decision to “take back control” (the outers’ main slogan). The taboo, for inners, was the possibility of defeat; for outers, it was the consequences of victory. From David Cameron’s government, if not the Bank of England, the neglect extended to zero contingency planning for a Brexit result. The ashen faces of the victors, Boris Johnson and his chums, told the same story.

So no one was prepared, emotionally or politically, for what was about to hit. Voters, too, found themselves every bit as disoriented in the wake of the referendum as they had evidently been ill-informed prior to it. Britain, its entire ruling apparatus muttering to itself “What the hell do we do now?,” felt eerily rudderless for days afterwards. Cameron having resigned, and chancellor George Osborne invisible, only the bank’s Canadian governor, Mark Carney, offered a semblance of leadership with essential reassurance to financial markets.

The brief hiatus was followed by the spectacular combustion of the Conservative and Labour parties. Three weeks were spent mainlining adrenaline on a manic political-media carousel. Theresa May’s appointment as prime minister on 13 July brought palpable relief as well as a touch of regret that the most exciting time in all our lives was over. Governance stabilised, and May’s message of social inclusion won plaudits. But other aspects of the post-Brexit landscape – economic, diplomatic and security – were as opaque as before. The vista recalled, and still does, a maxim that gained currency in the early days of the internet: “No one knows anything.”

Thus the decision to leave the EU, to which Britain exports over 44 per cent of its goods and services, has pitched the country into unmapped territory. Mapping it anew will be a lengthy and difficult process. The post-referendum limbo promises to be less a phase than a condition: an extended stay in a departure lounge while the international bureaucracy of onward travel gets down to its grinding work. Before reaching its ultimate destination, wherever that is, the country must learn to live in this interim one. Welcome to Brexitannia.

A well-worn tale has a lost visitor in rural Ireland ask a native for directions, only to be told: “Well, if I were you, I wouldn’t start from here.” The UK is nowhere near the point of clarity needed even to open that conversation. Its dilemma is closer to the Private Eye cover showing a taxi painted in the colours of the nativist United Kingdom Independence Party, or UKIP, whose driver asks, “Where to, Guv?” “1957 – and step on it!”

The referendum was indeed a depth charge under Britain’s establishment, and was stunningly successful in forcing an overhaul of the government elected only a year before (though the Conservative Party still rules). The winning tally of seventeen million votes, the highest for a single cause in Britain’s history, included most of the four million who had chosen UKIP in the 2015 general election, though many habitual Labour and Tory supporters contributed too. Turnout was 6 per cent up on 2015, and often approached twice that in historically pro-Labour areas. As a bottom-up revolt from marginalised areas, with an English nationalist tinge, there was something elemental – even stirring – in its power.

A giant collective “no” can be remedial, as frequent examples of various EU-related referendums in Ireland, Denmark, France and the Netherlands attest. And the instrument is a cudgel with no room for subtlety: people are entitled to use it to crack heads. Moreover, the government sets the terms, in this case David Cameron’s, and must take the pain and the blame when things go wrong.

All that acknowledged, Brexit’s driving impulse is stopping things and looking back. Peter Hitchens, an influential curmudgeon and a 1957 man to his very bones, said the question was “do you like living in 2016, and 52 per cent of the population said no, actually, not much.” The vote was overwhelmingly, from much available evidence, a negative one: variously against immigration, politicians, marginalisation, London and – often an afterthought, it seemed – Europe. It was linked to no program and set no definite course of action. (“More protest than proposition, like the campaign which promoted it,” says the Scots constitutionalist Jim Gallagher.) Even the coalition of forces that secured it was not united, and in the aftermath has no coherent mobilising force.

The current stasis is the price of this backward-facing victory. It will persist for as long as Britain and its key EU interlocutors decide how they intend to implement, or work around, the referendum decision. And even that, for Brexitannia, will only be the end of the beginning.

Here, too, the way ahead is uncharted. Only two territories have ever left the EU: Algeria, after gaining independence from France in 1962, and Greenland in 1985. As a self-governing part of Denmark, it had joined in 1973 (along with Britain and Ireland) but had come to want freedom from the union’s common fisheries policy. The island voted “out” in 1982, and negotiations – despite this sole issue and a population of only 52,000 – took three years. When they ended, Greenland was outside the EU yet maintained its link with Denmark: a unique constitutional position which (with reverse coordinates) some see as a possible future model for Scotland. But it offers little guidance for the UK as a whole.  

In 2007, the formal procedure for a member state to depart was specified in the Lisbon Treaty, the EU’s convoluted attempt – in what may prove the twilight of its political integration – to write itself a constitution. Article 50, unheard of in Britain weeks ago and now living the celebrity life, says that the state must “notify the European Council [the colloquy of EU governments] of its intention,” with both sides then concluding terms whose entry into force marks the state’s withdrawal. The process after notification should take a maximum of two years, although an extension of the period is possible if all agree.

Article 50 it is, then. But nothing is happening on that front yet, nor will it for a good while. On Britain’s side, there is no incentive to open talks until it has set its negotiating aims. In turn, that requires May’s cabinet to reach an internal consensus, mindful of pressures from Brexit-means-Brexit newspapers and voters, but also from business and the education sector, reliant on access to the EU’s single market. How the cabinet’s own tensions evolve is also a factor. May had the wicked brainwave of sending three rightist anti-Europeans to head the departments that will do most of the deal making. And Boris Johnson, David Davis and Liam Fox all happen to be peddlers of cant with outsize egos. It could be a bumpy ride.

Indeed a newspaper leak on 14 August revealed that Fox and Johnson are scrapping for the status of head boy. It was published to a chorus of “you surprise me!” from breakfast tables across the land. Fox, a pro-Anglosphere ideologue with a taste for the high life, has already gushed over Canberra’s and Washington’s enthusiasm for negotiating free-trade agreements with London. But since nothing in that direction can happen until Brexit is a reality, and since any FTA will be subject to multiple domestic inputs and pressures on both sides, Fox’s expensive jaunts are of doubtful value.

Europe, at least in the form of its most influential heads of government, is willing to grant London some time. After the vote, the mediocre head of the European Commission, Jean-Claude Juncker, and his sidekick Martin Schulz in the European Parliament, were pushing the UK to press the button. But Angela Merkel and François Hollande worry that too confrontational a line will embolden their countries’ own anti-EU populists. Juncker and Schulz – busking while Europe burns – see the loss of Britain as the removal of an obstacle to their maladroit integrationism, just as the tide of history is running the other way. Wiser heads see Brexit as a potential opportunity to rebalance the EU in favour of the European Council, while keeping options open. That, and the complication of those 2017 elections argue for some leeway over beginning the Brexit process.

The choreography is vital. Britain’s choice of when to trigger Article 50 – in effect to file for that divorce, not merely declare the intention – is its strongest card. Once played, the advantage passes to the EU, which has the unilateral right to end talks after the two-year deadline. Moreover, all other EU states will have preferences regarding the UK’s departure: Denmark over fisheries access, Italy over relocating institutions, Spain over Gibraltar, France and Juncker’s Luxembourg over financial jobs, Ireland over its land border and common travel area with the UK. The final agreement will also need ratification by EU governments, the European Parliament and (most likely) the twenty-seven national legislatures. There’s a load of potential here for blockage or even breakdown, both during and at the end of the process, with effects unwelcome to London.

That leads some to question whether, and more to hope that, Article 50 will ever be invoked. A group of constitutional lawyers says that an act of the UK parliament is required to give consent to this. Their main rationale is that “[our] membership of the European Union has conferred a host of legal rights on British citizens, some through incorporating statutes, some granted directly in domestic law... [The] government cannot remove or nullify these rights without parliamentary approval. Its prerogative power cannot be used to overturn statutory rights. Statute beats prerogative.” In addition, as a sovereign body parliament is not bound by the Brexit result: it might judge that this had been “gained under a false prospectus,” or that it would be against the national interest to open Article 50 if the consequences would likely be damaging to the UK.

Theresa May’s working majority of seventeen in the House of Commons would probably be enough to push an act through, though the House of Lords, with its less rigid party loyalties, will be tougher. Its opposition would precipitate a constitutional crisis, but Britain is living through a permanent one anyway. By that stage who could tell the difference? After all, it’s easier to call a referendum than a general election these days, thanks to the Fixed-Term Parliaments Act. And if May jumped the hurdles needed to call an election – a matter already under discussion as a way to entrench her authority – it would be the perfect moment for a keep-Britain-in-Europe mobilisation. That might even prove the last chance to avert not just Brexit but also the break-up of the UK.

A speculation too far? Perhaps. But looking back at Britain’s mind-bending last two years – a Conservative election win, Scottish National Party triumphs, Jeremy Corbyn’s becoming Labour leader, the murder of Jo Cox, the EU vote, the fall of David Cameron – it’s equally hard to believe that the upheavals are over. In Brexitannia, uncertainty is now king.

This is clearly so in the economic sphere, where the effects of a strident campaign and a close result also linger. Uncertainty and risk have increased since 23 June, with no discernible advantage. It’s true that these elements were unavoidably part of the referendum process from the start, that the right of the people to vote on a major national issue was considered paramount, and that Brexiteers say the UK’s continued membership of the EU would produce greater long-term problems. Thus, they believe, history will vindicate – or absolve – them.

The disputes are fierce on the economic impact of Britain’s choice. So far, there’s scarce evidence from which to draw firm conclusions. And there are good external reasons for uncertainty: the US election, Europe’s insecurities, China’s debts, Russia’s ambitions. That said, on trends specific to Britain the recent data are mostly negative.

Sterling, stockmarket indices and gilt yields are substantially down. The pound has fallen by a trade-weighted 15 per cent in 2015–16, though this is also welcomed as an overdue market correction that makes exports cheaper. The PMI, a leading register of business activity, dropped in July by the largest margin since it was first compiled in 1996. New full-time recruitment was the lowest since 2009. The Bank of England, which is pumping an extra £170 billion (A$287 billion) into the arteries and has halved interest rates to 0.25 per cent, reduced its growth forecast this year from 2.3 per cent to 0.8 per cent, and predicts the same in 2017. It also forecasts unemployment growth, albeit from a record low. A recession is expected, its length and scale unknown.

Some major companies have cancelled or relocated investments. Nissan employs 7000 workers in Sunderland, a northeast English city that voted 61.3 per cent to leave the EU. Its plant supports the employment of 30,000 more in the regional supply chain. Carlos Ghosn, CEO of both Nissan and its partner Renault, says the Brexit outcome will shape decisions on the future of this “European plant based in the UK.” The sentiment is shared by many companies for which the single market is oxygen, though few are going public while conditions are so fluid.

Theresa May, who promised a “comprehensive industrial strategy” on her arrival in Number 10, has contributed to the uncertainty by suspending the huge and expensive deal whereby a French company will build a Chinese-designed nuclear power station in England’s southwest. The Hinkley Point deal is unsound. It is also as controversial, and for much the same reasons of “national security,” as the NSW government’s proposed sale of the electricity provider Ausgrid to a Chinese partnership, which Scott Morrison has halted. In angering China, which the David Cameron–George Osborne government regarded as an ever-closer partner, May’s decision suggests that Britain’s strategic relations with the non-EU world are now as incoherent as those with Europe.

It’s important to keep perspective. The market adjustment was always going to be difficult. And if things are worsening now, it’s not that they were so good before. Far from it: the UK’s current account deficit was a vast 5.4 per cent of GDP in 2015, productivity is feeble, the housing market dysfunctional, the macroeconomy unbalanced, and the labour market filled with insecurity and wage stagnation, for all the strong employment record. Moreover, the same statistics generate point-scoring and confirmation bias in both camps. “The economy’s strengths/vulnerabilities are an argument for Britain staying in/leaving the EU” can be sliced four ways.

What’s beyond dispute is that there is no Brexit bounce, least of all in confidence. Already, further years of hard economic grind were in prospect. Now the bleakness in prospect is multiplied by the need to reset all Britain’s trading and political relationships in the conditions of greatly added uncertainty that the decision to leave the EU has itself generated.

Several costs are already apparent. Much bigger ones are coming. To take just one example, Britain lacks trade negotiators. It will need to hire many, and they don’t come cheap. Any benefits, whatever they might be, are years away. For the foreseeable future, Brexit is a great black hole, sucking in huge amounts of energy and emitting only dust.

An ocean of ink has already been spilled on the relationship Britain should now seek with the EU: the Norway model (EEA/EFTA, full single-market access at a substantial price), the Swiss model (EFTA, limited market access plus bilateral agreements and payment of EU costs), or an outright departure from both EU and single market. The latter could mean joining the EU’s customs union (as Turkey has) or negotiating a trade agreement with Brussels (as have fifty other states or blocs).

Another option, which would become the default if the two-year period passes with no EU–UK agreement, is to simply observe WTO rules (tariffs included) and roam free. In principle, this might appeal to generally opposed versions of Brexit, each with deep cultural roots: the nativist bulldog (“You looking at me?”) and the globalist buccaneer (“Take me to your loot”). In practice, wherever Britain wants to go, it will require an old English knack well suited to the modern world: compromise. That decisions have consequences, and other countries too have their agendas and interests, will make for an interesting period ahead.

As the legal scholar David Allen Green concludes in a brilliant post on “Brexit and the challenges of reality”:

The 52 per cent vote for Leave in a non-binding referendum will increasingly seem flimsy against the sheer magnitude of the task ahead. If Leave politicians were candid and realistic about the years, sweat and tears ahead, you could believe they were up to it. But they maintain it is easy, and unless their attitude changes, it is this complacency that will defeat them. Denialism and wishful thinking are not enough.

“Was it for this…?,” from a line in W.B. Yeats’s acerbic, melancholic poem “September 1913,” has long been an Irish shorthand used to connote disillusioned national idealism. That it’s now more often used in an ironic or self-satirising way is a measure of how far modern Ireland has come, politically and psychologically. Brexitannia is on track to repeat the cycle without going anywhere at all. •