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A UK Political Update

With Alex Deane, Senior Managing Director FTI Consulting, and Ian Richardson, Director of Executive Education Stockholm Business School

Alex Deane:

We should acknowledge that Brexit has never been the central focus for European/Global attentions- often outpaced by US Elections or COVID.

1. We have lost political focus (due to COVID)

2. We have lost economic focus (due to COVID)

There is almost no point in arguing the finer details that political parties have found themselves tripping over given the scope/scale of the challenges being faced by the global economies.

Intensive night and day talks on everything (including legal texts) are taking place which is reducing the likelihood of a no-deal.

The UK Government is seriously committed to proving they are willing to take a no-deal (PM May failed on).

The UK did not want to extend the transition period for 3 reasons:

1. A belief that the EU always agree a deal at the last minute

2. UK keen to agree deals with 3^rd parties (e.g. Japan)

3. Avoid contributions to the EU Coronavirus bailout over 6 years

It has been under-reported how sick the UK PM was which permeated the negotiations.

The Opposition Lead, Starmer, is a mainstream politician who has the challenge of balancing the 5m Brexit voters from his party.

Ian Richardson

It seems that the economic impact of Brexit has been somewhat buried by COVID. The UK is actually potentially on track for the compound impact of Brexit, a 2^nd COVID wave and a fall in the value of sterling due to a potential no-deal. Is this a perfect storm?

Alex Deane

I still think we on track for deal due to most of the deal text being already written.

The over-promising of the UK entering a recession upon the vote for Brexit has left many people inured to any suggestion the economy will do badly. However, the threat does still exist.

We are demonstrating Keynesian left wing economic truths in which Governments can go through periods of high debt during a period of crisis.

Ian Richardson

Does it not make sense to extend the transition phase to allow us extra time to deal with COVID?

Alex Deane

A feverish belief amongst many in Parliament that any extension is an attempt to prevent Brexit.

Most deals are done at the last minute and there is a benefit to forcing a deadline.

Question

What constitutes a successful outcome for the UK or a disaster of the current negotiations?

Alex Deane

Brexiter viewpoint: reaching a deal (including N.I.) with certainties for trade agreements vs. open ended financial contributions to the EU

Question

Ivan Rogers, fmr. UK EU Ambassador, discussing PM Johnson waiting for the outcome of the US Election before committing to a no-deal? Also, evidence that Number 10 has not had any discussions with the Biden campaign about trade?

Alex Deane

This will be a close election as the Democrats are focusing on high votes in their own safe states. Whereas, there have been higher Republican registration numbers and Trump is often under-polled.

Trump prefers bi/multi-lateral trade deals, a supporter of Brexit, has property in the UK and was “over the moon” over his family’s exposure to H.M. the Queen.

Biden is the last of a euro-centric generation who see the world through a Cold War prism- since he was first elected back in 1972. Biden is more interested in Europe than Obama who looked more towards the Asia-Pacific region.

One of Trump’s achievements has been the global move in political consensus on China towards America’s views.

I give no credence to the story on Ivan Rogers.

The UK and US are the biggest investors in each other- with 1m employees in each nation.

Question

Is fishing really important to the UK or is it just a bargaining tool? Plus, what about state aid?

Alex Deane

On fishing: the UK wanted a Norwegian-style deal which would involve annual negotiations between Britain and the EU. This would allow Britain more control over its waters. Symbolically, and politically, it is highly important but economically it is unimportant. Macron has alluded to France being willing to make a payment for access to British waters. Stakeholders on both sides will say they are being betrayed.

State aid: the UK is a laissez-faire economy which is far less likely to support failing industries.

EU has conceded that there will not be a major role for the ECJ over Britain

Question

Who will benefit from the changes Brexit will bring to the UK?

Alex Deane

Companies who import/export outside of the EU due to EU protectionism being limited.

Question

How major/minor has the entanglement of EU regulations impacted upon the UK and what is the most challenging task for the UK at the moment?

Alex Deane

Seeking to convert the “low hanging fruit” of available deals into meaningful 3^rd party deals.

The UK has potentially benefited from being half in-half out of the EU

• Biggest challenge: a shortage of time for the UK with negotiating trade deals

• Biggest opportunity: ability to pursue own trade deals and put a special focus on the services sector- which the EU has never done

• Big risk: most of the EU economies are debt laden because of COVID, including Britain

The UK will put an increased weight on our other memberships (such as NATO).

Our thanks go to Alex Dean and Ian Richardson for speaking at this event with the BSCC