THE Conservative Government’s Brexit odyssey became even more bizarre over the weekend – no mean feat – with a newspaper report that UK companies were being advised by officials at the Department for International Trade to set up companies in the European Union.
To observe that this is a bizarre situation is not to judge the advice which is reported to have been given to the companies which sought it.
The shambles which has ensued, following the end of the Brexit transition period on December 31, is plain for all to see. It is only natural that businesses will explore every option to minimise disruption and limit extra costs and, depending on their circumstances, they may decide that setting up within the EU makes sense.
Given the Conservatives ruled out remaining in the single market and customs union with unseemly haste, in the wake of the 2016 Leave vote, it was always inevitable that operations and jobs would move from the UK to continuing EU member states. Obviously, there is a consequent hit to the UK’s economy and tax revenues from this, which is likely to build as time goes on with a continuing drift.
Following the Brexit vote, as things became clear, big UK banks moved swiftly to set up operations in EU countries to deal with what was coming and, in the end, financial services was excluded from Prime Minister Boris Johnson’s narrow trade deal with the EU. So was the rest of the key services sector.
And plenty of other businesses have looked at whether or not to set up operations in the EU to ward off disruption. Some of these deliberations were framed in the context of uncertainty over whether there would be a deal or no-deal outcome. However, these contemplations have also had, and retain, great relevance in relation to the hard (though not no-deal) Brexit which has transpired.
Mr Johnson’s aforementioned narrow deal has caused chaos for so many companies which export to the EU, at the worst possible time, as well as restricting the supply of certain foods to the UK as a whole and causing real woes on this front in Northern Ireland.
Over the weekend, as well as The Observer report on what companies said they had been told by the Department for International Trade about setting up within the EU, we had talk of the possibility of retailers abandoning or even burning returns from customers in the bloc because this would be cheaper than returning them to the UK.
Ian McConnell: Brexit psychology laid bare in this barrage of propaganda: Opinion
There was also a Financial Times report of the potential for Brexit to add £1.50 to the cost of a £12 bottle of wine because of new paperwork etcetera. This is one specific example but it paints a broader picture – bureaucracy and the loss of frictionless trade naturally mean extra expense for the consumer.
With their Brexit folly, the ruling Conservatives, often regarded as the party of business for reasons that are far from clear given extreme economic clumsiness since 2010 and during the Thatcher era, have shown they are certainly anything but that right now.
It has been left to Tory veterans, such as Lord Heseltine, to point out the folly of the Brexit implemented by Mr Johnson and co.
Former president of the board of trade Lord Heseltine late last month urged MPs and peers to abstain when voting on the Brexit deal unveiled by Mr Johnson so triumphantly on Christmas Eve. Lord Heseltine warned this deal would cause “lasting damage” to the UK.
Of course, Mr Johnson and his fellow Brexiters, if they had been able to put their ideology aside for long enough, could have seen that for themselves. All they needed to do was look at the forecasts of the damage on a 15-year view drawn up by the Theresa May government.
Given many Brexiters continue to argue against reality, it is worth detailing these again. These November 2018 forecasts signalled Brexit would, with an average free trade deal with the EU, result in UK gross domestic product in 15 years’ time being 4.9% lower than if the country had stayed in the bloc if there were no change to migration arrangements. Or 6.7% worse on the basis of zero net inflow of workers from European Economic Area countries. Of course, the Tories have since clamped down on immigration.
The extent of the immediate shambles in the wake of the end of the transition period, and intensity of anger from certain sectors, may have taken some people by surprise.
However, they should not have done. The UK Government’s ideological opposition to committing to abide by EU rules and standards, reflected in the dismal and unambitious free trade deal the Johnson Government pursued and agreed regardless of the huge costs to others relative to being in the single market, was always going to result in major friction.
The short-term chaos may have been even worse than it is had travel between the UK and EU destinations been at normal levels, as opposed to having been depressed dramatically by the coronavirus pandemic. But massive trade disruption like that we are seeing was, in any case, always an inevitability.
Even with its ideology, the Conservative Government must surely have recognised this. Such an awareness, assuming it exists and the Government is not incapable of a basic understanding of the situation, makes its disgraceful refusal to extend the transition period, and keep the UK in the single market for now amid the huge economic fall-out from the coronavirus crisis, all the more unacceptable.
We have already seen the enormous and lamentable problems created by Brexit-related bureaucracy for Scotland’s seafood industry but the troubles are widespread, across sectors and the UK.
We had a UK Government advertising campaign which ran for months ahead of the end of the transition period, telling businesses to prepare.
But the narrow deal was not done until December 24. And, as you can see from what has ensued, there was a huge amount of small print that it would have been most helpful for businesses to know about in enough time as they strived to mitigate the inevitable Brexit damage.
Ian McConnell on Brexit: Keir Starmer U-turn dismal as Tories unable to run menodge
Rachel Reeves, shadow chancellor of the Duchy of Lancaster and shadow minister for the Cabinet Office, said: “Once again we see this Government’s sheer incompetence and lack of planning holding British businesses back and slowing our economic recovery.
“They’ve got to get a grip on this now and stop leaving our businesses out in the cold.”
And she tweeted: “This is a shambles. The Government’s own advisors telling British businesses – overwhelmed by costs and red tape – to relocate operations to the EU. They’ve got to get a grip on this before jobs are lost and our economy suffers even more.”
Hopes of this Government getting a grip may well be in vain. It has shown itself incapable of getting a grip on the realities of Brexit. Although it has, amid the mayhem, clung on at all costs, and regardless of the expense to businesses and households, to its ideological Brexit and to ramming this through in practical terms by December 31.
The Department for International Trade response to The Observer story went as follows: “This is not government policy, the Cabinet Office have issued clear guidance…and we encourage all businesses to follow that guidance. We are ensuring all officials are properly conveying this information.”
The Cabinet Office is headed by arch-Brexiter Michael Gove. Its contribution, when it has come to its job of helping businesses prepare for the Brexit folly of Mr Gove, Mr Johnson et al, has been woeful.
Have an advertising campaign for months when there is at that stage no deal, let alone any terms. Land businesses with something at the last minute. Cue chaos.
Ian McConnell on Brexit: We are now all bedevilled by bitter fruits of Tory division: Opinion
The Department for International Trade’s statement that the Cabinet Office has issued “clear guidance” looks, to put it mildly, like a matter of opinion.
However, whatever opinion might be formed on this, businesses will have to make up their own minds about what to do. It does not matter that it is “not government policy” to advise on setting up EU operations.
Companies will take their own decisions on what is right for them. And the UK Government will have to deal with the consequences.
Mr Johnson talked of his Government’s deal with the EU allowing the UK to have its cake and eat it.
In reality, it looks like he and his fellow ideological Brexiters have paved the way for the EU to take a fair-sized bite of the UK’s lunch.