Brexit: Ian McConnell: Experts will tell truth of Brexit while Tories indulge fantasies

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PREMIUM

YOU would think the report card on Boris Johnson’s Brexit issued this week by international ratings agency Moody’s would make embarrassing reading for the Prime Minister and his Government.

The “you would think” qualification here is not included because there is any doubt over what is being said by Moody’s. The ratings agency is perfectly clear when it says the UK economy will be “significantly smaller” over the longer term with Brexit. Moody’s declares the “macroeconomic cost” for the UK of losing European Union membership has been confirmed. And it gives its view that the economic provisions of the UK’s deal with the EU (an agreement which was trumpeted so loudly by Mr Johnson on Christmas Eve) are “skewed in favour” of our EU neighbours.

Meanwhile, Moody’s declares: “The economic benefits from new regulatory autonomy remain uncertain.”

So there is no doubt Mr Johnson, and the arch-Brexiters in his Cabinet who have visited this cost upon businesses and households throughout the UK, should be absolutely mortified by the report card from Moody’s on their Brexit. The problem is that past experience would suggest they will not care one jot.

 

Michael Gove Picture: Aaron Chown/PA

Of course, Moody’s is in a way, with its assessment of the narrow Brexit deal arrived at by Mr Johnson, just providing further heavyweight confirmation of a reality understood by many.

People who took a moment to contemplate the effects of Brexit, and where necessary weigh up the welter of expert comment, have known from the outset that it was not a good idea. They were not, like many Brexit voters, beguiled by the spin of Mr Johnson, Minister for the Cabinet Office Michael Gove, and arch-Brexiter Nigel Farage.

That said, the conclusions of Moody’s provide a valuable perspective, cutting through all the political hype and focusing on the realities of the Johnson deal and where it leaves the UK relative to EU membership.

The mood music from the Johnson Cabinet and its backers might, on the face of it, suggest these arch-Brexiters somehow remain unable to ascertain what has been obvious to so many people for years: Brexit is bad for the country.

So many Brexiters seem pumped up by what they appear to perceive as an enhanced Britishness arising from leaving the EU.

But Mr Johnson and his arch-Brexiter Cabinet must know the actual story of Brexit? Surely? Their ideology is something of truly epic proportions but it surely cannot obscure the unfolding reality to that extent? Can it?

Of course, the agenda behind Brexit has always been obvious. We have already seen the grim clampdown on immigration from EU countries, something that the Theresa May government’s own forecasts showed would be very damaging indeed to economic output. The UK has benefited greatly, in terms of a boost to general living standards from the economic fillip provided by freedom of movement, over the years and decades.

That boost has now been lost, although that does not seem to bother the likes of Home Secretary Priti Patel, who late last year celebrated the ending of free movement between the UK and EU very noisily indeed on social media. She did so as much of the rest of the world was celebrating news of the success of the Pfizer-BioNTech vaccine. It is a sorry situation indeed. And it remains utterly lamentable that the Johnson Government remained hell-bent on pushing through its ideological Brexit even amid the human tragedy of the coronavirus pandemic.

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The immediate negative effects on businesses and households of the narrow Brexit deal done by Mr Johnson just ahead of the December 31 end of the transition period just keep on piling up. It is an extraordinary shambles. Amid this mess, we must also bear in mind that the huge Brexit damage will unfold over years and decades.

The food and drink sector is among those bearing the immediate brunt of the Tory Brexit mess, but it is far from being alone. This week, among the many manifestations of Brexit reality, we read that Lough Neagh eels will no longer be able to go from Northern Ireland to Billingsgate fish market to be sold. And that Amazon is looking at removing some products from sale to customers in Northern Ireland, potentially including food supplements, because of the new post-Brexit arrangements.

The Society of Motor Manufacturers and Traders, while relieved the UK did not leave the European single market in a no-deal scenario on December 31, has declared “there is no such thing as a tariff-free deal”. This observation has been made in the context of new rules-of-origin considerations in trading with the EU, which are having a major impact on many fronts for businesses.

Alessandro Marongiu, SMMT international trade policy manager, told the House of Lords EU goods sub-committee: “Rather, tariffs apply unless you can comply, and demonstrate you can comply, with rules-of-origin requirements. So the threat of tariffs for the automotive industry is there, although the agreement allows us to trade tariff-free and quota-free.”

 

Boris Johnson Picture: Oli Scarff/.PA

He warned longer-term rules of origin for environmentally friendly vehicles and batteries are “some of the toughest ever negotiated by the European Union”, while welcoming the dispensations for electric vehicles until the end of 2023.

Mr Marongiu said: “In general, friction at the border and customs issues affect essentially all trade in goods between the two parties and certainly trade in automotive products.”

And Luke Hindlaugh, senior EU and international trade executive at the Food and Drink Federation, told the committee that rules of origin relating to his sector mean the UK has in some cases worse access to EU markets than Canada has under its trade deal.

This is not a splendid situation, obviously, given the proximity and huge importance of EU markets to the UK, something that seems to have been overlooked or ignored time and again by the Johnson Government as it has pursued pipe dreams of big new trade deals with anyone but the EU, to no avail.

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A report in The Observer that UK companies were being advised by officials at the Department for International Trade to set up companies in the EU underlined the unfathomable absurdity of the whole Tory Brexit odyssey.

This is to say it is the situation which is ridiculous, not the advice. Businesses will naturally explore options to mitigate disruption and minimise extra costs. Depending on their circumstances, they may decide that setting up within the EU makes sense, with implications for UK jobs, economic output, and taxes.

The Department for International Trade response to the 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.”

Government policy or not, companies will make up their own minds.

The Brexit deal report card from Moody’s sums up the situation well.

It is headed: “New Brexit trade agreement confirms macroeconomic cost for UK of losing EU membership.”

Moody’s declares: “The agreement’s economic provisions are skewed in favour of the EU, with the UK willing to accept significant new barriers to trade in areas in which it has a comparative advantage. As a result, the new arrangement between the UK and EU will entail significant negative macroeconomic consequences for the UK that are structural in nature.”

Benedicte Andries, a Moody’s analyst and the report’s co-author, says: “While the Brexit agreement avoids a no-deal scenario, it largely lacks substance in areas vital to the UK economy, such as services. The UK economy will thus be significantly smaller over the longer term.”

This encapsulates well simple realities of the Johnson Government’s Brexit, and its consequences.

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The view from Moody’s on the deal should come as absolutely no surprise.

However, given the yarn the arch-Brexiters in the Cabinet having been spinning to their acolytes in the Leave camp, it might not be what these followers would expect to hear.

Some of those beguiled by Brexit, including people operating in the fishing industry, have now seen the realities of the situation, and are angry that the Government told them this was all going to be wonderful, when quite the opposite was the case. That said, you would, sadly, expect many Brexiters to remain in denial.

And, as surely as night follows day, you would expect the Conservative Government to continue to celebrate Brexit, in spite of all the damage it is doing and will cause.

It will remain up to the experts, whether Mr Gove still thinks “people in this country” have had enough of them or not, to tell the actual story of Brexit. Unfolding reality will also shine light on the truth.

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