Monday 21 October 2019

Richard Curran: 'No-deal Brexit hasn't gone away and we're in eye of storm'

Vote bid: Tory leadership candidates to replace Theresa May are trumpeting the end of austerity. Photo: AFP/Getty Images
Vote bid: Tory leadership candidates to replace Theresa May are trumpeting the end of austerity. Photo: AFP/Getty Images
Richard Curran

Richard Curran

Trouble is brewing with Brexit - real trouble. The Revenue Commissioners know it. That is why they have gone ahead and appointed 500 new staff for new customs duties, despite the March Brexit deadline being missed.

The Government knows it too. That is why Tanaiste Simon Coveney was so willing to rule out an early general election before Christmas, which some felt would avoid the headaches of two bye-elections.

The way Brexit is going, we will either be in a no-deal crash-out by Christmas, or remain totally unclear about what will happen by the end of this year.

Other European governments know it too. That is why Dutch foreign affairs minister Stef Blok insisted last month while on a visit to Dublin, there will have to be border controls between Ireland and Northern Ireland in the event of a no-deal Brexit. He said he stood with the Irish but "European borders have to be protected".

The statisticians know it. Official figures show the British economy contracted sharply in April as manufacturing slumped with the end of Brexit stockpiling.

Irish exporters know it. In a recent survey by Enterprise Ireland 40pc of Irish exporters said they had been negatively affected by Brexit while the figure for the food sector was 60pc.

Lots of people don't know it, or know but don't seem to care. Count in this group a large swathe of the 10 candidates bidding to become the next leader of the British Conservative Party and by extension Prime Minister.

The British media are going to enormous lengths to decipher the subtle differences between the lot of them on Brexit. It doesn't matter. Several, including favourite Boris Johnson, are capable of saying one thing now and something completely different once they land in office.

While speaking in Dublin at the Pendulum Summit in January Mr Johnson was asked why he had gone along as a Cabinet minister with the principle of the border backstop, only to totally reject it months later. It was a "convenient fiction", he said.

How many more convenient fictions are being written right now?

Michael Gove is unlikely even to get a sniff (so to speak) at Number 10. The candidates have made all sorts of bizarre promises and threats in an election campaign that looks increasingly reckless.

One leadership candidate (Dominic Raab) talked of suspending Parliament to drive through his vision of a no-deal Brexit. Elsewhere one cabinet minister, who voted three times for the Withdrawal Agreement but is opposed to a no-deal crash out, faces a no-confidence motion from within his own party for "wilful obstruction" of the result of the referendum.

Some candidates are openly talking about reneging on British financial commitments to the EU, irrespective of the overall withdrawal agreement. This means advocating that the country welch on its debts to the EU.

Yet, amid all of this madness there is a strange calm in Ireland about Brexit. Consumer and business sentiment surveys show that we are still very conscious of a possible bad Brexit on the horizon yet household spending continues to rise.

There is some disbelief about what will happen with Brexit and it is very worrying. The disbelief is based on the idea that having failed to leave at the end of March, Brexit may not ever actually happen. The benign scenario goes something like this. There will be a new Tory leader/Prime Minister who will most likely be a hard Brexiteer. Once in Downing Street this person will try to re-negotiate a better Brussels deal and fail.

They will, however, baulk at a no-deal Brexit when the time comes or if not, they will be stopped by the British Parliament from crashing out without a deal.

This will most likely trigger a second referendum in which people will vote to call off the whole thing. Or alternatively, Brexit will just fizzle out without a second referendum.

But there are other scenarios which are less benign for Ireland. The next leader of the Conservative Party will be decided by the membership of the party who are overwhelmingly pro-Brexit and willing to, if not dying to, leave without a deal.

The average age of a Conservative Party member is 57 with 40pc of them over 65. They are concentrated in the southern half of the country. Of the 120,000 Tory members, nearly 60pc of them live in Eastern England, London, the South East and the South West. Around 85pc of them do not want a second referendum.

They truly are a 'conservative' group with six out of 10 supporting the death penalty.

The next Prime Minister will be the person this group believes has the best chance of seeing off Jeremy Corbyn and Nigel Farage in a general election. So, it will be a hard Brexiteer.

This all points towards a no-deal crash-out. If the British parliament stops the government from crashing out without a deal, the Tories will be terrified of being crushed in a general election as much by the new Brexit Party as by Labour.

Even if a second referendum became the preferred option, there is absolutely no certainty that such a referendum would bring about a different outcome. Who knows even what the question would be?

Among Irish businesses there is huge scope for complacency. Brexit has become an entertainment reality TV show that no longer appears to have any meaningful impact on people's lives here.

The reality is quite different. Irish firms that spent a lot of time and effort preparing for a worst-case scenario may feel there is nothing more they can do. Others who took a risk and did nothing ahead of the March deadline may feel vindicated and still plan to do nothing.

Even aside from the machinations of Brexit and how it might play, there are deeper issues emerging for the British economy. The uncertainty is starting to bite in terms of investment by British and non-British firms in the UK economy.

Ireland has benefited and should continue to do so, from this uncertainty. Our Foreign Direct Investment numbers are very strong. As are our employment figures.

But Brexit is most likely to damage indigenous firms in sectors and locations where it is harder to build new jobs. Most of the FDI will arrive in places where it is needed least. In fact, there is a real argument to be made about how much and what kind of new FDI the country now needs.

With full employment, a housing and infrastructure crisis and a capital city that is creaking, more large job announcements may not be the best thing for the country right now.

Irish exporters are already responding by reducing their dependence on the UK market. This is borne out by Enterprise Ireland research and it is the only silver lining that may emerge from this pending Brexit shambles.

Already candidates for Number 10 are lining up to make extraordinary promises about what they will do in office. They want to abolish the top rate of tax, spend billions on new infrastructure and slash income taxes. Of course much of this is vacuous electioneering but it is setting a tone and expectations around what happens next.

Tory leadership candidates are trumpeting the end of austerity and higher borrowing because the exchequer finances are deemed to be in good shape. The UK has £1.8trn in national debt, which is 86.7pc of GDP, and borrowed £24bn last year.

The exchequer target is to move towards a deficit of 1.2pc this year. Nobody is talking about running a surplus any time soon.

The Tories aren't just taking a leaf out of Donald Trump's ultra-nationalist rhetoric, but also adopting his approach to borrowing as US national debt soars.

Irish business is in the eye of this storm as much as ever. It really is time to be worried.

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