“In the wilderness prepare the way for the Lord; make straight in the desert a highway for our God. Every valley shall be raised up, every mountain and hill made low; the rough ground shall become level, the rugged places a plain.”
The quotation above is one of the key Bible readings for Advent; as the preacher said in our Sunday service ‘making a straight highway for a VIP arrival was the biblical equivalent of the red carpet’. It’s just as well that we had no such expectation of that for Brexit because, as expected, it’s the usual EU cliff-hanger.
Our last comment on Brexit was on 14 September when we predicted negotiations going to the wire and beyond, and we’ve studiously tried to avoid getting drawn into the merry-go-round in the intervening weeks. But now, as we’re told that negotiations could run up to New Year’s Eve, it’s time to ask - does it really matter? There will be a degree of chaos in the new year whatever happens, but we’ve coped with a lot worse than that in the past.
So in this commentary we look at how Brexit sits alongside the economic damage wreaked by Covid-19, and we ask whether it really was membership of the European Union, or the Thatcher revolution, which drove British recovery in the years 1987 – 2007.
Boris has been right to hold firm in the face of EU bullying over the past few months. This whole sorry story of Brexit has been chequered with EU opportunism:
- It started with Leo Varadkar trying to use it to force Irish unification - we should remember that this is the reason why the Government has had to resort to the ‘Internal Market Bill’, now kicked into touch for three months while we see who squeals loudest in the first quarter of 2021. Recent comments from Taoiseach Micheál Martin sound increasingly like those old roadrunner movies when it speeds over the edge of the cliff, suddenly to become aware of the drop beneath;
- The negotiators have shown how an undemocratic oligarchy can run rings around democratic government, as national EU leaders have persistently deferred to Michel Barnier and his chums as a device for presenting a wall of obstinacy throughout negotiations;
- Both Switzerland and Norway can vouch for the impact those bullying tactics have had on their relationship with the European Union.
So now we’re beyond last chance saloon (even though we’re still talking!), and the United Kingdom and European Union will almost certainly have to experience what trading on WTO terms feels like. In particular, EU businesses who trade with the UK will no longer shelter behind euphemisms from their semi-detached national leaders, and will experience directly what it means: and it won’t be long, therefore, before those leaders have to answer to them for their failure to arrange with United Kingdom as they’ve already agreed to arrange with Canada.
Meanwhile how will the UK fare?
Not surprisingly, the foreign exchange markets marked £Sterling down sharply as the reality of ‘no deal’ took shape last week. The following morning the business writers predicted spiralling inflation and an imminent return to economic chaos.
But things are very different to the 1970s. We start with rock-bottom inflation and interest rates, as a result of decades of immense scalability of supply and de-monetisation of demand due to the tech revolution.
We are also in the midst of unprecedented economic disruption as a result of Covid-19, and we’ll be embarking on a huge infrastructure spending programme to get the country working again - not to speak of the boost to export potential from that falling exchange rate. It will be difficult for the analysts to unbundle what’s due to Covid and what’s caused by Brexit, even if WTO rules apply.
Finally, it’s important to look back to the 1980s and ask whether it really was EU membership which brought about British recovery or whether it was the Thatcher revolution? Having lived and worked through that period, I would say that the complete change in industrial and business attitudes was the result of the latter, not the former. Old and efficient practices were driven out and replaced with a new dynamism which is very much part of today’s business environment.
There’s no doubt that massive border disruption in the new year will cause chaos; but if the European Union doesn’t pull itself together and agree a Canada-style deal with the United Kingdom, it won’t take long for British businesses to look further afield for their new trading relationships. Cargo aircraft and shipping are not held back by Covid-19, and there’s plenty of capacity for long-distance trade.
Meanwhile, the European Union will be hard hit by WTO rules, without any such compensatory expectations. It will suffer from hugely reduced exports to the UK, and have to struggle with the consequences of an over-inflated euro. Its budget will be significantly reduced by the ending of UK contributions. And, it too has to cope with the devastating impact of Covid-19, which is increasingly exposing Western Europe - including the United Kingdom - as even more vulnerable than the Americas. Indeed the epicentre of Covid-19 fatalities is Belgium, the very country which lies at the heart of the European Union:
derived from Worldometers
Democracies have, in general, not coped well with the virus in comparison with authoritarian regimes. At least in a democracy, however, the people can call time on an ineffective leadership: as they have done in the United States. In the European Union, the same ineffective bureaucrats just go on and on and on - surely it is time to move forward from this system of governance, as we proposed on 5 November 2018?
Gavin Oldham OBE