EU Referendum


Brexit: muddy waters


13/01/2018




A year after the referendum I was complaining that the "Ultras" had been thrashing around so much that they had muddied the waters. And if they kept it up, I warned, Brexit could go belly-up.

But whether it's the "Ultras" or others muddying the waters, the real point is that Brexit ain't in the bag yet and, as I observed, "it ain't in the bag until it's in the bag". If we lose momentum – as we seem to be doing - we really could end up seeing our dreams drain away into the sand.

Maybe, though, what we're seeing is Brexit fatigue. The cold and the long nights of winter always have their effect and, without any positive developments to bolster our spirits, it is only natural that we're downbeat. Under normal circumstances, when the nights shorten and the temperatures start to rise, the mood might improve of its own accord.

The trouble is that this is so much more than winter blues. The substantial failings in the government's Brexit strategy are sufficient in themselves to cause overwhelming gloom, while the inability of the various campaigning groups to focus on the mechanics of withdrawal is justification for any amount of despondency.

Amid this gloom, however, there has been one bright spot in the way the Irish authorities, media and businesses have reacted, leaving their UK equivalents flat-footed by comparison. And from their media we have been able to get some inkling of how Brexit is developing.

But even that has been something of a mixed bag. The Times, for instance, is conveying the views of Julie Sinnamon, head of Enterprise Ireland.

She has it that Irish businesses are still in denial over the impact of Brexit more than 18 months after the referendum result and have failed to plan for the risks it poses, blaming "wishful thinking" for companies' slow reactions.

Irish businesses are faced with a series of existential threats greater than those affecting UK operations. One can only observe that if they are unable to confront those threats, it is hardly surprising that UK operations are failing to respond in an appropriate or timely manner.

From that, one can infer that it may take some time yet before UK business as a whole fully appreciates the nature of the threats posed by Brexit and gears up to protecting its own interests. If there are stages of denial, then over here we are in the stage that currently dominates Irish business.

We are not helped in any way by the refusal of government to spell out its precise demands (or expectations) for the future relationship with the EU. Without any firm (or any) formal relationship having been defined, there is nothing for business to plan against. It can assume that plenty of notice will be given before action must be taken.

Another level of uncertainty arises from the failure of the German political system to agree the coalition necessary to form a government. As a result, policy signals coming from Merkel have been weak and ill-defined while SDP leader Martin Schulz has been given room to speculate on the EU's future, calling for a United States of Europe by 2025.

Recent developments though, have delivered a result, with Merkel's conservative Christian Democratic Union and Schulz's Social Democrats agreeing to enter formal negotiations with a view to forming another grand coalition.

One of the first casualties of the deal has been Schulz's grandiose plans for the EU, but the parties have agreed that Germany should increase its budget contributions to the EU. They have also agreed in principle to eurozone reform.

It will be a while yet before Germany is able to form a stable government – perhaps not until after Easter, leaving some elements of Brexit hanging while the EU's largest and most powerful contributor concentrates on its domestic affairs.

Various corners of the debate, therefore, are conspiring to defer decision time of Brexit, while boiler-plate drivel from the likes of the Legatum Institute serve further to muddy the water.

What is probably meat for future historians, we have a remarkable situation where there seems to be an inverse correlation between the need for urgency and the intensity of activity. The more important and urgent it is that our politicians come to a swift conclusion on Brexit, the less they appear inclined to do so.

On the other hand, there is the question of focus – or the lack of it. The more we need to concentrate on the resolving the detailed technical issues, the more it seems the media and the politicians are prepared to dissipate their energies on distractions such as another referendum or whether Article 50 can be revoked.

This raises the question that we have mooted several times and at diverse levels – as to whether the political system (and its media handmaiden) is actually capable of undertaking anything as complex as the Brexit negotiations.

As I think more about this – in the context of the situation deteriorating rather than improving – it seems to me that we should abandon any ideas of seeing the government deliver an effective or rational Brexit. There is simply no point in seeking out something that the government is incapable of delivering.

If this becomes the vade mecum, then we could see the politics of Brexit undergo a fundamental change. Instead of devising the best possible exit plan – as we attempted to do with Flexcit – perhaps the better strategy is to assess the modes of failure which we can expect.

In anticipation of failure – which we must treat as inevitable – we then look to devising piecemeal recovery programmes which will seek to reduce the adverse effects. In other words, we do not treat failure as an abnormality which we seek to avoid. Failure becomes the norm and the primary focus of policy is the response to failure. Planning becomes a matter of predicting how government will fail and devising the appropriate remedies.

By way of an example, we can expect the government to chase after a thoroughly unsatisfactory free trade agreement, which will prove highly damaging to the UK's economic interests. Strategy thus becomes a matter of devising programmes which will overcome the worst effects of such an agreement.

One might, in this context, look to beefing up our attempts to promote multilateral sectoral agreements to reduce the impact of non-tariff barriers on high value exports of interest to the UK, thereby mitigating the damage caused by an unsatisfactory FTA which fails to reduce NTBs.

In this there is a certain amount of irony, at a personal level. It was two decades ago that I attempted to move away from my speciality of food safety but, every time I do, I seem to get dragged back. In this context, one of the advanced food safety management systems we were considering back then was the concept of failure mode analysis – now better-known as failure modes and effects analysis (FMEA).

Turning full circle, FMEA-style policy-making  could end up at the heart of Brexit planning – an attempt to gaze into the murky waters of political failure and recover something of value from the incompetence of our politicians. Expecting something useful in the first instance is probably too much to ask.