Latest Brexit Update

November 14th 2019

Current Brexit date

January 31st 2020 – although sooner if a deal can be agreed by Parliament following the General election on December 12th 2019.

Reading the figures

In spite of widescale closures of manufacturing plants, the collapse of leading high street retail chains and the large-scale financial exodus from institutions in the city of London, UK employment has appeared to have kept stable and unemployment fallen since the Brexit vote. How can this be? One reason is explained in an obscure corner of the UK Office for National Statistics (ONS) website. Employment statistics rely heavily on a sample survey called the “Labour Force Survey”. The problem with this method is that each year since 2002 the size of the population sample willing to take part in the necessary interviews has fallen – and has, in fact, been cut in half over the intervening period until today. There is also no valid way to determine if interviewees are representative of all those in the economy. Thus, this statistic is deeply flawed.

Unemployment data, on the other hand, is collected by the Department for Work and Pensions and each month the number of “discouraged workers” falls away from the total number of those classified as unemployed and seeking work. Hence, the official unemployment rate remains below 4% – a small proportion of the true inactive population.

The Russian connection

The reason why British voters decided to embrace Brexit, even though it was against their own economic interests has confounded analysts ever since the referendum in 2016. Yet its probable answer lies in an as yet published report that has been cleared for publication by the UK intelligence agencies, but is being delayed by the Prime Minister’s office, pending the general election.

The parliamentary report tracks the murky connection between the Brexit campaign, Conservative party finances and huge amounts of money from Russian sources. One focus for concern in the Intelligence and Security Committee (ISC) document is likely to be the role of the Prime Minister’s Special Adviser Dominic Cummings, who was campaign Director of “Vote Leave” and had worked in Russia between 1994 and 1997, in an era still dominated by corrupt Russian Oligarchs.

Bad news for multinationals

The grim truth about Brexit deal III worked out between the current UK government and the EU this Autumn is that in attempting to remove the Irish backstop there will be established a huge facility for smuggling goods into, and through, the European Union – often tariff free.

The new Protocol has found a form of words that both allows Northern Ireland to remain in the UK, but also have an open border with the Irish Republic. To ostensibly avoid smuggling, Article 5 sets out a process whereby types of goods can be identified as being at “risk of subsequently being moved into the [European] Union”. But there will also be a general exclusion clause if goods are not processed in Northern Ireland – although they can be relabelled.

The cross references and double negatives in the Protocol are clearly designed to confuse the reader, but the essence of this replacement for the former “backstop” is that with a long open border there will, in practice, be virtually no barrier to “badge engineering” and the smuggling of goods into the EU (ie: the South) having imported goods to the North via any new trade agreement, or free trade concession the UK decides to introduce. Of course, there will also be the option of exporting via Northern Ireland (and a hop across the border) goods that have been made in Great Britain, to be reshipped from Dublin to non-EU countries with which the EU has tariff-free trade and the UK does not. 

Such a backdoor trade will, no doubt, help revive the established mafia in the province – the IRA. This could, in turn, undermine legitimate trade within the EU and generate a thriving grey economy to the cost of many multinationals operating legitimately there.

Why a “No Deal Brexit” may still work for trade

So, if the UK crashes out of the EU on January 31st 2020, what will it mean for UK international trade? The answer is that it could mean very little. Last July the UK circulated to all World Trade Organisation states (which consist of most countries in the world) its own schedule of goods tariffs and concessions. This was basically a cut and paste from the joint schedule it shares with the EU until Brexit. Several countries objected to the schedule – which means that the whole thing is blocked until the objections can be resolved. But this is not necessarily the tragedy it appears, as the UK can continue trading under an “uncertified schedule” until everything is sorted out.