Reality is steadily dawning

by Sean Rickard

What have the Taliban got to with Brexit?   Nothing directly, but what the fiasco of the retreat from Afghanistan has exposed is the flawed belief that freed of its EU obligations Britain would be a force to be reckoned with on the world stage.   Prior to the G7 summit earlier this year, Brexiters lacking a grasp of reality, could cleave to their Faustian pact; namely, accept an incompetent but vote-winning Boris Johnson to ‘get Brexit done’ and thereby restore the UK to former glories.   Freed from an integrating Europe, the Brexiters pinned their hopes on the ‘special relationship’ with the US, or more accurately the demented Mr Trump.   But, as scholars have long pointed out, the ‘special relationship’ fêted by Brexiters’ is an illusion.   And without the support of the US any contribution the UK could make to international peace and security would be heavily constrained by a persistent, below par economic performance, now made worse by Brexit.   

I have, in previous blogs likened Brexit to a Suez moment for the UK and the same can now be said of Afghanistan.   As was demonstrated so cruelly by Suez some 65 years ago, any influence the UK may hope to wield on the world stage required the support of a more powerful economic actor.   Suez broke Eden, and Afghanistan may beat Brexit in ‘doing for’ Johnson.   Harold Macmillan was quick to learn the lesson of Suez: Britain’s subservience to Washington could only be broken if Britain joined a united European voice.   Thus, began the process that would eventually see the UK as a prominent member of the EU.   

The Brexiters’ never learnt, or disregarded this reality.   Having ‘got Brexit done’ i.e. moved Britain to a state of perpetual negotiations with the EU, Johnson’s subsequent behaviour antagonised Brussels.   Under his leadership, the UK stands isolated, humiliated by Biden, and distrusted in European capitals.   ‘Global Britain’ is now revealed for what it always was, a mindless rallying cry.   Britain’s status as an independent actor on the global stage has never been lower.   But the ‘wrecking ball’ of Brexit will delay the inevitable; namely, the UK rebuilding economic, political and security ties with its erstwhile European partners.  

The reminder of geopolitical impotence adds to the mounting evidence of the insanity and economic self-harm of Brexit.   For the government Covid provided a distraction from the underlying costs that are now being revealed as spreading far beyond fishing and farming.   Business leaders are calling on the government to take action to ease labour shortages, in effect to relax its post Brexit immigration ideology.   The lack of lorry drivers and consequential bare supermarket shelves may take centre stage on news bulletins, but it is only the tip of the iceberg.   The difficulties of recruiting suitable employees are impacting not only other retailers but also the hospitality sector, manufacturing and warehouse operations, the construction industry and IT companies.   Unsurprisingly employers are responding to the shortages with higher wages and incentives.   But such ‘self-correction’ threatens to make businesses less competitive and raises the spectre of rising inflation with potentially serious consequences for trade, living standards and the costs of servicing the public sector’s record level of debt.  

Another self-inflicted cost is the ideological attempt to establish a UK certification mark.   Despite the rhetoric regarding taking back control, the reality is that UK regulations are unlikely to diverge from those of the EU in most areas.   The zealots may have dreamt of a regulatory ‘race to the bottom’ but the UK does not have the capacity to separately test vast ranges of products and many EU-based suppliers consider it uneconomic to obtain a UKCA mark in order to supply the UK market, raising the risk of gaps in British supply chains.   Inevitably the government has been forced to further extend the deadline for using the EU wide CA marks.   This extension will, I suspect, become permanent, the more so as CE marks are to be recognised in Northern Ireland in perpetuity under the terms of the UK-EU trade agreement.

Less in the public eye but potentially far more devastating is the decline in business investment and the ‘fire sale’ of undervalued British companies to foreign private equity buyers.   According to the ONS, over the six months since the end of the transition period, business investment has declined some 15 per cent compared to the first six months of 2019.   As regards circling equity buyers, Lord Grimstone, Britain’s investment minister, conceded that Brexit uncertainty had helped to depress share prices i.e. increased companies’ vulnerability to opportunistic bids.   He naturally sought to put a positive spin on the activities of overseas buyers but all signs point to the return of ‘asset stripping.’   Short-term profits rather that building long term wealth is the goal of private equity.   Debt is used for the purchase and having acquired the company the cost-cutting is ruthless – workers are laid off, and pay and conditions are attacked alongside redundancies – while assets such as land and buildings are sold.    

Covid explains why the post-Brexit clouds gathering over the UK – both economic and political – are not attracting serious attention in the media.   It is however also the case that the ignorance concerning the many benefits of EU membership persists and few have any interest in talking about Brexit.   The fishing and farming communities are in the vanguard of realising they had been misled about the benefits of Brexit, but it will take time for other sectors to catch-up.   To date, Brexit has resulted in the City of London losing £1tn in assets and 7,400 jobs to the EU.   It will only be a matter of months before the influential financial services sector realises that what they took as promises to cut ‘rules and regulations’ – for which Britain was ironically the main driving force – where in fact rhetoric.   In reality, deregulation was never an option: it would have comprehensively shut the City out of the EU and other markets.   The reality of Brexit is steadily dawning.