Strategic Forecast 2020

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CWA # 222, 25 February 2020
Strategic Forecast 2020
The Pangs of BREXIT: UK's Tough Transition in 2020

  Sourina Bej

CWA Brief, February 2020

The Brexit entails the rejection of what the EU stands for: the freedom of unrestricted mobility of capital, labour, services and goods and the rights of the centralised EU administrative power over the member states

Background

The 2016 referendum supporting the United Kingdom’s decision to ‘exit’ the European Union (EU) has entered a new beginning after three and a half years of political negotiations, a new withdrawal deal, one general election and two Conservative Prime Ministers in UK. After 47 years, the United Kingdom (UK) will leave the bloc of 28 countries by January 31, 2020, setting in a transition period under the terms of the Brexit deal that will maintain an economic and institutional status quo between the UK and EU while the two parties settle on a favourable trade agreement. In 2019 the series of deadlocks over Brexit deals and socio-political polarity between the Remainers and Leavers ended, but the year also witnessed the rise of the Conservative majority and nationalist sentiments fracturing the country. The year 2020 will see few of these trends unfolding from the last year. The Scottish and Irish nationalist question, the economic trade deal between EU and UK and the future of the opposition party in Britain will be the significant developments to watch for in the coming year.

Major Trends in 2019

Post the referendum, the UK under Prime Minister Theresa May embarked on a long ordeal to negotiate a withdrawal deal over an 18-month period, approved by the 27 other EU governments in November 2018. Rejected three times by the UK parliament between January and March 2019, the deal and the Brexit process ended the political road for May replacing her with Boris Johnson in July 2019. This process of negotiation headed partly by Theresa May and partly by Boris Johnson has set in motion a series of events and trends that dominated the UK politics in 2019. 

Polarisation in Party Politics

The party politics in UK polarised based on their understanding of the deal to an extent that the division was widened and fought out only with a general election in December 2019. May’s deal promised to deliver on the referendum result by putting an end to the free movement, huge UK payments to the EU, and an exit from the unpopular EU structures on farming and fishing. This brought hostility not only between the ruling party of Conservative and the opposition Labour party but also made it difficult for May to strike a balance between the pro and anti-European wings of the Conservative Party with her Brexit plans. The UK-EU divorce deal had blurred several red lines on the limits of EU’s power that sparked fury within her divided Conservative Party. As negotiations with Brussels brought more UK concessions, a string of government resignations followed. In addition, the 2017 general election left the Tories severely weakened in the Parliament. The Westminster stood divided between Conservative’s demands for a “hard Brexit” to Labour’s demand for a “softer Brexit.” 

Amid the parliamentary deadlock in early 2019, pressure from Tory obliged May to open the door to a Brexit delay — and engage in cross-party talks, which collapsed after a few weeks. May lacked the risk taking ability and her fate was sealed when the fourth Brexit was rejected through the Parliament. The race to fill the leadership vacuum quickly started with the strongest critic of May, Boris Johnson. When he showed his support for May’s deal, he said, “I genuinely think that unless this thing goes through, the House of Commons is going to steal Brexit.” It is with this political agenda to pass the Brexit in the Westminster that Johnson became the Prime Minister in late July and announced on 28 August the suspension of the Parliament to prevent further vote of non-confidence on the Brexit. His political gamble to force through a "no-deal" Brexit and gain ample time to gather the new deal paid off with even the Queen formally consenting Johnson's request. 

It was only in early October that he submitted a detailed proposal for a new divorce deal to Brussels. He then removed its controversial plan for Northern Ireland to reach a compromise. The new Brexit deal significantly removes the Irish border bottlenecks. The EU and the Irish government want to ensure that the border remains open and unobstructed, in line with the 1998 Good Friday peace settlement. As post-Brexit customs and tariffs come into effect between the UK and the EU, Northern Ireland would act as a border check for goods entering EU member Ireland. Northern Ireland would not only remain in the single market of the EU but also within the customs of the UK. Despite succeeding in ironing out the details with both Ireland and EU, his deal was rejected and Johnson was quick to take yet another political gamble of the general election after two years. 

The restlessness among the public had increased with each failure by the Parliament to pass the bill and the moment was opportune for Johnson to shape an electoral strategy that frames the Brexit battle as “the people versus Parliament” agenda.  Election call thus ushered the making of Johnson’s majority in the Parliament that would not only stand by his promise of an exit and also gave him the numbers to pass the bill in 20 December. 

Return of a Conservative Britain 

The election culminated the weak standing of the Tories and turned its losses in the early part of the year into potential gains later in the year. The opposition Labour Party is now the only party that stands bifurcated on its position on the Brexit and the future of its leader Jeremy Corbyn is in question. 

After the snap election was declared by Boris Johnson on 12 December 2019, the Tories — boosted by the decision of the anti-EU Brexit Party under Nigel Farage largely to stand aside —campaigned on a promise to leave the EU by the end of January. Even though the general election was not the correct way to resolve many technical issues in the UK’s Brexit crisis, the politicisation of Brexit and running it on the election mandate definitely brought back the Tories stronger since Thatcher’s times. But, the unpopularity of opposition leader Jeremy Corbyn played a big part as many traditional Labour seats fell to the Conservatives.

Labour’s defeat had more to do with its Brexit position than its programme. While the party leaked votes in all directions, most seats were lost in the post-industrial, Leave-leaning northern regions. This election result closely mirrored the Brexit split between the parties, thus transforming the 2019 election into a kind of a second referendum. Corbyn’s evasive and ambiguous approach to Brexit during the General Election was probably unavoidable given the dilemma with which he and his Party had been wrestling since 2016. (The Economist, 2019) It transformed into a party whose voters and members were overwhelmingly hostile to Brexit but whose leader saw definite merit in Brexit. As a result the Labour policy towards Brexit had always been incoherent. 

Rise of Scottish Nationalism

The Brexit process has also given rise to strong nationalist sentiments among the Scottish and Irish population of the country. The UK voted to leave the EU by 52 per cent to 48 per cent in June 2016. But the result has increased strains between the UK's individual countries: England (53 per cent) and Wales (52.5 per cent) voted to leave, whereas Scotland and Northern Ireland voted by 62 per cent and 56 per cent respectively to remain in the EU. This strain was also visible in the election last year. The Liberal Democrats' campaign pledge to stop Brexit altogether if elected was unpopular with voters, and instead the Scottish National Party  (SNP) with an agenda to "stop Brexit" won the vast majority of seats, north of the border with England. (Catherine De Vries, 2016)  

The party has called for another referendum on Scottish independence, following a failed attempt in 2014. There are also calls for a border poll on the island of Ireland after Northern Ireland elected more Irish nationalists to the UK parliament than pro-British unionists. This is a significant event that took place since partition nearly a hundred years ago. In Scotland results were also dramatic. Apart from Labour party losing its working class votes from the mining, metal working and shipbuilding industries, the spectre of Scottish nationalism puts the future of the union of England and Scotland into question.

Tattered Economy

Apart from dealing with critical demands from the European Union, the country’s economy has witnessed a sharp fall. Economists at the accountancy firm of KPMG said that the knock-on effects to Britain’s trade and business confidence of a no-deal Brexit would lead to the economy shrinking by 1.5 per cent by 2020. This estimation is based on the current decrease in consumer spending, which has provided between 60 per cent and 80 per cent of growth in the economy over the last three years. The central bank has predicted a recession in the wake of a no-deal Brexit. The question on whether UK is ready for post-Brexit recession has not been dealt at all in 2019. The policy changes over the last 10 years linked to the government’s austerity programme meant the poorest households had lost access to benefits that protected them in the 2008 crash, hence if a recession sets in, it’s the lowest income household that will fall into extreme poverty. (Thomas Sampson, 2017)

Forecasts for 2020

 

The now inevitable British withdrawal from the EU in early 2020 creates a situation in which those who sought to prevent Brexit will need to choose between accommodation and resistance. The scope for a “soft Brexit” by the pro-accommodation looks thin considering the exponential majority of the nay-sayers in the Parliament. Those who prefer resistance will loudly denounce all progress made in the Brexit negotiations so far and hence will be seen grouping with the pro-accommodation group. The Parliament looks very different from the last. The election brought a cull of centrist politicians — several of whom had previously left the two main parties accusing them of extremism. 

Tough Talks on Trade with EU

In 2020, what will remain as the top concern for the country in the Brexit transition period is the EU-UK trade deal. During this period the UK will effectively remain in the EU's customs union and single market - but will be outside the political institutions and there will be no British members of the European Parliament. The first priority will be to negotiate a trade deal with the EU. While the UK wants as much access as possible for its goods and services to the EU, the bloc countries want a level playing field in UK. 

With limited time before the country completely leaves the bloc by 2021, it would take weeks by EU to agree on a formal negotiating mandate - all the remaining 27 member states and the European Parliament in agreement and then formal talks could possibly begin in March. 

If no trade deal is agreed and ratified by the end of 2020, then the UK faces the prospect of tariffs on exports to the EU. Even though Johnson has argued that as the UK is completely aligned to EU rules, the negotiation should be straightforward, the business groups are holding on a lot of their finance boost and market investment plans as the clear path on level playing field will remain undefined. In addition, the UK must agree on co-operative terms with the EU on security and law enforcement. With the UK set to leave the European Arrest Warrant scheme, a replacement of several institutional mechanisms remains to be agreed on. Customs and regulatory checks would not be carried out on the island of Ireland, but at ports —a new regulatory divide in the Irish Sea would have to be planned out.  

The European project is an unprecedented, ambitious, civilising enterprise that has managed to tame nationalist passions and stabilise democracies. But these single markets are now eroding member states’ capacities to protect their citizens and curb inequalities. No doubt the British government has kept an ambitious cherry-picking immigration policy that looks to reduce the income divide. This is also possible due to Britain’s reputation as higher education destination and by moving out of EU, it will deprive the bloc of its three universities in the world’s top ten, and of seven out of 12 in the top 50 QS rankings.

Towards an Economic Recession 

Corollary to the trade deal is the concern of downward growth of UK’s economy. The domestic house price growth will remain subdued next year at between 1 per cent and 3 per cent according to Halifax, with the market held back by young buyers struggling to afford deposits. Despite talk of a “Boris bounce” after the election result, most major property institutions are forecasting that price rises in 2020 will be limited. The rents have been predicted to rise faster than house prices, by 2.5 per cent nationally and 3 per cent in London, partly because the supply of new rental properties has fallen in recent years.

Stronger Nationalist Debates in Scotland and Ireland 

It would be a challenge and also interesting to see how the new Prime Minister builds on the nationalist narrative and counter Brexit demands in Scotland. All indications are that the movement for independence is growing. Unlike England and Wales, Scotland voted positively in the EU referendum to remain in the EU and the UK’s departure will strengthen the claim for another referendum on Scottish independence. The implications of this referendum could be Scotland re-joining the EU if it were able to fulfil the EU’s financial and other conditions. In addition, UK’s relation with NATO vis-à-vis Scotland and EU’s relation with NATO have to be envisioned. There would also be security implications if the SNP expels the Trident submarine from Scottish waters and the SNP is opposed to any nuclear weapons in Scotland. The national question here is the issue in Ireland. The Democratic Unionist Party (in favour of staying with the UK) suffered a 5.4 per cent decline in their support in Northern Ireland; although still the largest party, calls are being made for a referendum on unification with Ireland. (Iain McLean, 2016) An added legitimacy to this demand would be found in the eroding votes for the centrist party in Northern Ireland. Could both the demands gain ground, a Brexit could be followed by an equally tumultuous national building process of the UK.  

A New Face and Tone for Labour Party 

The future of the opposition hangs in balance in the post-election Britain. Corbyn’s biggest mistake was his electoral strategy in trying to keep the Leavers and Remainers together thereby alienating both the sides. The Labour party is known to have the most heterogeneous electorate among the three main parties in Britain. Any stand on the Brexit deal would have cost them either of their electoral bases. For the Labour party, the major losses came rather in traditional, heavily working-class, socially-conservative constituencies who were not particularly attracted by the ‘New’ Labour-style politics. In 2020, the leadership of Jeremy Corbyn will be replaced by a much more centrist leader with a personalised political view. Unlike Corbyn who hold rigid republican view supporting the Irish Republican Army, the new leader will be someone who does not alienate the British nationalist voters. As the political landscape becomes more conservative the Labour party can’t simply sustain with a radical appeal to the ‘losers of globalisation’. Many political analyses have to come to terms with a rather centrist view of the working class as the new social reality. This election in December showed there is no automatic relationship between a radical agenda and progressive voting among the poor. The working class of the past does not exist anymore, rather class politics itself is not enough in a social fabric crumbling after decades of neoliberalism and Brexit represents the deinstitutionalization of the political process. (Dan Sabbagh, 2019)

After securing the Withdrawal Agreement on 20 December, the UK will leave the EU on 31 January 2020. This marks the beginning to a new series of negotiations, between EU-UK by 31 December 2020. Unlike Theresa May, Johnson will now be able to play a very strong hand as he will be able to command support in the Parliament and even threaten a ‘no deal’ on tariffs and trading conditions. This will be a period of political wrangling. Thus it is in the interest of both the EU and UK to maintain positive trade and cultural links. The EU has a considerable trade surplus with the UK and exports from Germany would suffer greatly in the event of a tariff war.

The EU will be significantly weakened by the exit of the UK. The Brexit entails the rejection of what the EU stands for: the freedom of unrestricted mobility of capital, labour, services and goods and the rights of the centralised EU administrative power over the member states. But, the Brexit negotiations also carry with it the political lessons for EU. There has been a tendency for members of the EU Commission to dismiss demands from member states for more sovereignty. Along with popular opposition to the EU, it is paralleled by movements in all the EU member states and the UK’s successful exit will give a psychological boost to these developments. As the member states are closely integrated politically and economically into the EU structure, exit for them is not a practical and political possibility. Internal disruption and extra-legal havoc, along the lines of the Movement des gilets jaunes (‘yellow jackets’) in France and challenges to EU laws (as in Poland and Hungary), are likely to magnify - unless current demands for little more sovereignty are seriously reconsidered and amended. In another lesson, the EU also understood the repercussions of an electorate vote of confidence on its membership. 

Within the bloc Germany and France will undoubtedly become more powerful and geo-politically, EU will be able to adopt a more independent foreign policy which might have implications for normalising relations with the states of the Eurasian Economic Union. The United Kingdom on the other hand will also charter its own independent foreign policy course in terms of its relations with the NATO, US and China. 

References

  1. The Guardian (2017, 22 June). “A year after voting for Brexit, Britain’s divided, and in uncharted waters.” Retrieved 24 December, 2019 from https://www.theguardian.com/commentisfree/2017/jun/22/year-ago-britain-voted-leave-eu-worse-both-worlds
  2. Catherine De Vries. (2016, 19 December)  "Populism on the Rise? The Brexit Vote and Beyond." in University of Oxford EU Referendum and Brexit: Analysis. Retrieved 20 December 2019 from http://www.ox.ac.uk/news-and-events/oxford-and-brexit/brexit-analysis/populism-rise
  3. Iain McLean. (2016, 22 July) “Scotland, Ireland, and Brexit: what history tells us?" in University of Oxford EU Referendum and Brexit: Analysis. 
  4. Thomas Sampson. (Fall 2017) “Brexit: The Economics of International Disintegration." Journal of Economic Perspectives. Volume 31, Number 4—Pages 163–184. Retrieved. 3 January, 2020 from https://doi.org/10.1257/jep.31.4.163 doi=10.1257/jep.31.4.163
  5. Dan Sabbagh. (2019, 13 December)"Election result signifies realignment of UK politics." The Guardian.  
  6. (2019, 13 December) "Jeremy Corbyn’s crushing defeat." The Economist. Retrieved 23 December, 2019 from https://www.economist.com/britain/2019/12/13/jeremy-corbyns-crushing-defeat
  7. (2019, 13 December) “Victory for Boris Johnson’s all-new Tories.” The Economist. Retrieved 23 December, 2019 from https://www.economist.com/leaders/2019/12/13/victory-for-boris-johnsons-all-new-tories

Sourina Bej is a Project Associate with the ISSSP at the National Institute of Advanced Studies, Bengaluru 

This essay was published at the NIAS Quarterly on Contemporary World Affairs, Vol 2, Issue 1, January-March 2020  

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