EU Referendum

Brexit: keeping business afloat


EU officials are making plans for a "no deal" scenario in the event that the UK crashes out of the Brexit talks. This is according to Stefaan De Rynck, senior advisor to Michel Barnier, in charge of public engagement strategy and relations with think-tanks.

In that role yesterday he broke the news at an event organised by the Institute for Management. Until now, the fact of EU contingency plans had been kept secret and even denied earlier this month by European Council President Donald Tusk. De Rynck made it clear that this was not something they wanted to advertise. "There is a clear negative impact from no deal", he said, "especially for the UK economy". Thus, it was not a scenario that they wanted to work towards.

Nevertheless, he said, "We are preparing for it, that is for sure, the 27, but it is not something we in the negotiation room want to bring in that negotiation room". He added: "We negotiate in good faith and hope for 'sufficient progress' by December".

De Rynck warned that: "In a normal negotiation you try to create value on the table and if you don't take it, if there is no deal, you both walk away and you have the same situation as before you started negotiating. That is not the case in this particular negotiation. People have to think through the consequences of that".

He continued: "If there is no deal as of April 2019, clearly the UK is for the EU what any other third country in the world which is - you don't have a preferential trade deal and that has serious consequences. It means that the international agreements which are now being discussed that Britain falls out of that - not just trade".

This ties in with what Sir Ivan Rogers was saying on Wednesday, with the transcript of his select committee evidence now available. "In any negotiation", Rogers said:
…where I start out is what is the counterfactual. In any negotiation where the counterfactual is the status quo, obviously you not only threaten to walk out but sometimes would walk out. Why would you not? If the status quo is better than the world that you are being offered, you walk out. The status quo is not on offer here. The counterfactual if there is no deal is not the world we currently inhabit. It is a world without a deal.
At least, therefore, there is understanding on both sides of the Channel, even if the extent of the peril does not seem to have percolated to the higher reaches of government or the leaden minds of the "no deal" advocates. There is a scenario where "no deal" does actually mean no deal, with all the consequences that that implies.

De Rynck also dismissed David Davis's fantasy scenario in which Brussels leaves a settlement to "the 59th minute of the 11th hour of the 11th day". With the transcript also available, we see Davis saying that this "is precisely what I would expect to happen here", to which de Rynck responds that Brussels would "certainly want to avoid" talks "going to the wire".

On two levels, therefore, the Brexit Secretary has been openly contradicted: on his assertion that a trade agreement can be reached by the end of the Article 50 negotiating period and now that the Commission will leave it until the last minute before making a deal.

Unsurprisingly therefore, when one sees the UK's chief negotiator clearly lacking a grip, the EU is planning for the "no deal" scenario. This could just as easily be to deal with an "accidental Brexit" as the result of a deliberate walk-out. Either way, the effect is the same.

All this does, though, is confirm precisely the point that David Davis and the May Government no longer have a grip on the Brexit negotiations. Events are spiralling out of control and the comments from minsters – including the Prime Minister - are increasingly irrelevant.

Everywhere we look, we see their statements being contradicted, another being that there will be no visible border between Northern Ireland and the Irish Republic. Former WTO chief Pascal Lamy takes this up, stating that a [hard] border will have to be imposed post-Brexit regardless of any UK/EU trade deal. The moment a country leaves the single market, borders go up, he says. The border question cannot be evaded.

This is the real world intruding and, increasingly, people and businesses are having to make decisions based on the reality, leaving behind the likes of Davis rooted in his fantasy construct.

By way of an example, we see the ferry company CLdN SA deploy the newly-built ro-ro ferry to the port of Dublin. This 234m giant, with the capacity of 8,000 lane metres (equivalent to nearly 500 articulated trucks), was originally intended to serve the UK-Belgian route but has now been pressed into service on the Dublin-Zeegrugge route, by-passing the UK route to the continent via Holyhead.

With additional ferries also planned, to exploit the major expansion of Dublin port, we thus see practical steps being taken to reduce the Irish dependence on the UK and to forge increased direct links with EU Member States.

Resorting to the cliché that nature abhors a vacuum, in the absence of credible plans from London, businesses are having to resort to their own stratagems to stay afloat – to coin a phrase. By the time UK politicians get down seriously to addressing the Irish border question, practical solutions will be well in hand – and mostly to the detriment of the UK economic interest.

What applies to Ireland, though, will also apply to the rest of Europe and to UK-based businesses. One does not only sense the growing frustration with the uncertainty over Brexit, increasingly we see firms take their own action to mitigate the risks.

Even the famous Toyota is getting worried and it can't be long before the steady trickle of businesses executing their contingency plans becomes a flood. If panic sets in, there will be no stopping it.

Interestingly, in his evidence to the Brexit Committee on Wednesday, Davis – for the first time that I can recall – mentioned the recognition of driving licences as an issue. Although he was not specific and the media didn't follow up, this is at last official recognition that we have a problem here.

I do wonder how long it is going to take for the media to wake up to the reality that, with Brexit, UK-issued driving licenses will no longer be valid for driving on the continent (the entire EEA area).

Slowly, some media sources are getting used to the idea that there will be delays in the ports, but mere customs delays fade into insignificance compared with the chaos that will ensue when no truck, van or private car, with a British-licensed driver will be allowed to drive out of Calais Port, or any other continental port.

Mr Davis thinks he can sort this out on the 59th minute of the 11th hour, but he has been disabused of this fantasy. A "no deal", taking effect on the 60th minute, will quite literally see road traffic in the ports grind to a halt.

In a sane world, this would be front-page news, but the media apparently doesn't think this prospect important, or even believe it will happen, any more than it can be bothered to report that food exports to the continent will most probably cease, alongside chemicals and pharmaceuticals. And that is even with a deal.

But if the media can't break away from its obsession with the Westminster bubble, more and more businesses are seeing the danger. They are not waiting to be told by an ignorant, venal media. They can see the writing on the wall.

And this week, with the help of Ivan Rogers and others, that writing was larger and clearer. Soon, even the media might notice – but they will be the last to know. By then, they will be reporting history.