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Brexit won't happen when UK finds pill too bitter to swallow


British Prime Minister Theresa May speaks to the House of Commons after setting out her plan for Brexit negotiations with the EU. Photo: Getty

British Prime Minister Theresa May speaks to the House of Commons after setting out her plan for Brexit negotiations with the EU. Photo: Getty

AFP/Getty Images

British Prime Minister Theresa May speaks to the House of Commons after setting out her plan for Brexit negotiations with the EU. Photo: Getty

So, I don't think Brexit will actually happen. There, I've said it. While I'm at it, I think Ireland will rise to the Brexit challenge and will emerge stronger at the other end.

In many ways Brexit is the ultimate manifestation of a point I made here recently about populist politics. That's the argument that complex public policy problems have simple solutions they - government, politicians, the establishment - refuse to recognise. Unhappy with your life? Blame the foreigners and everything will be OK.

Now, after months of scrambling, squirming and chin scratching, British Prime Minister Theresa May presented her 12-point plan for EU negotiations. But she failed to explain that it wasn't in fact a plan, but a wish list. So, while we have more clarity on what Mrs May would like, there's no sense of how she will have her wishes fulfilled. That's why, among other reasons, I think the task of the UK exiting the EU is simply too large, too complex, too economically damaging and too politically toxic for the system to actually process. The pill is simply too large for the patient to swallow.

Related to this assessment is my confidence about how Ireland will respond to the Brexit challenge. But I'll come back to that.

I think Brexit won't happen for three different, but cumulative, reasons: economic, political and legal/bureaucratic ones. Let's look more closely at the first two - even though the last challenge is immense.

Mrs May talked about a global Britain on Tuesday while speaking about leaving the globe's largest and wealthiest trading bloc. It simply doesn't make sense. By committing to leaving the single market and the customs union she crystallised her own treasury's recent predictions of what a 'hard' Brexit/reversion to the WTO model would do.

By reverting to the WTO model, which involves new trade tariffs, the UK economy would shrink by 9.5pc and tax revenues fall by £66bn (€76bn) per year.

On jobs, the City of London, the London Stock Exchange (LSE) and the Confederation of British Industry (CBI) and many others have been unambiguous about Brexit. The LSE warned last week that 230,000 jobs in London were at risk because of Brexit. Within hours of Mrs May's speech, HSBC, UBS and Lloyds all signalled plans to move jobs out of London. The key here is the ability to trade across borders with a 'financial passport' that membership of the EU provides. The CBI, in a report from December, set out the six priorities to make Brexit a success. The first priority is that after Brexit the UK retains a "barrier-free relationship with our largest, closest and most important trading partner". Well, that's not going to happen now. Things just got a lot harder for the 190,000 enterprises it represents.

Finally, in a 'hard' Brexit environment where new tariffs are introduced, red tape soars and costs rise, the outcome is higher prices. As inflation rises, the Bank of England is under pressure to push up interest rates and suddenly home owners are paying more for their mortgage and businesses are paying more to invest in their enterprises. Everyone gets squeezed and a negative economic spiral follows.

On the political side the challenges of Brexit are well documented. We are naturally most concerned about Northern Ireland and any regression from the progress of recent years. The SNP wants to force another Scottish independence referendum and the Conservative Party is clearly split on the Brexit outcome. Labour has Jeremy Corbyn as its leader. With elections in France, Germany and the Netherlands in 2017, there is no mood in Brussels to accommodate the UK with a deal that is better than the one available to club members. It just won't happen. The logic of this position doesn't seem to have registered in all corners of Whitehall.

With a slim government majority of just 12, the commitment to a vote in both Houses of Parliament on any deal with the EU was potentially the most significant development in Mrs May's speech. If a deal finally gets presented, it will, by its nature, be a compromise that will likely provide room for Remain MPs or Leave MPs to vote against it because of its imperfections.

Crucially, for political cover, they would be voting against the 'deal' rather than against the original will of the people. If no deal is forthcoming - or Mrs May tries to kick a deal down the road past a UK General Election in May 2020 - the roadmap becomes even less clear. By then the economic concerns flagged earlier may have started to bite - higher prices, slowdown in investment, fewer jobs, higher cost of borrowing - and the accumulated political, economic and bureaucratic costs of the narrow Brexit 'yes' vote might be better appreciated. By vote of parliament, an outcome of a general election or a painfully pragmatic realisation of the folly of the original proposition I believe Brexit as planned will not happen.

During this period when the UK is contorting its political, bureaucratic and enterprise systems to try to process the Brexit vote Ireland too has huge challenges to face, but, as stated earlier, I am more optimistic than pessimistic about our prospects. The main reason I say this is because I have seen what Irish enterprise can achieve when challenged.

In my time in the Department. of Jobs, Enterprise and Innovation, I saw what Irish enterprise could do in response to a global crisis - helped by the alignment and support of government and dynamic agencies like Enterprise Ireland and the IDA. In the first four years of this decade, Irish exporters dragged our GDP growth rates into positive territory. Between 2012 and 2015 our levels of employment, according to the OECD, grew three times faster than the rest of the OECD.

When Ireland collectively puts its mind to a challenge, it can achieve huge results. From what I see and hear I believe the same collective effort is being rallied now and it will, I believe, see us emerge stronger having been tested.

Ciarán Conlon is a former senior government adviser

Irish Independent