The British government continues to lurch from crisis to crisis as it grapples with its departure from the European Union. The most recent setback was the resignation last week of two senior ministers, one of whom was responsible for Brexit negotiations with the EU, in disagreement over terms for withdrawal put forward by Prime Minister Theresa May only days before. While attention is focused on whether May will survive as leader of her government, the real issue is mounting uncertainty about the deal that will eventually be struck. The clock is winding down and businesses will be making decisions about their future that could marginalize Britain’s place in their plans.
Leaders of the Brexit movement promised voters that departure would be easy, and that they could retain all the benefits of EU membership without any of the costs. They preached an a la carte menu of obligations and rewards that bore no resemblance to reality, despite warnings from Brussels and more realistic British politicians. Brexit narrowly prevailed and advocates have been complaining ever since that May was botching the process — without ever offering a credible alternative.
As the countdown continues — Brexit occurs March 29, 2019, with a deal or without one — May has struggled to devise a negotiating position for Britain, much less forge a consensus with Brussels. This month, she convened her Cabinet at Chequers, the prime minister’s country residence, to lay out her blueprint for withdrawal. Only an outline of the plan has been presented to other lawmakers and the public, but it is being sold as a “pro business plan” that would protect U.K. ties to the EU. The government’s three-page summary, available on its website, says London would agree to “a common rule book for all goods” along with a “combined customs territory” between the United Kingdom and the EU while “different arrangements” will be made for services. The U.K. would leave the European Court of Justice, although the court would have some role interpreting EU rules.
Days after that 12-hour meeting — in which all ministers reportedly agreed with the plan — Foreign Secretary Boris Johnson and Brexit Secretary David Davis announced their Cabinet resignations. Johnson was especially colorful in his denunciation, calling the agreement “an exercise in economic masochism that Britons will long regret.” Johnson noted that “Brexit should be about opportunity and hope,” but added “that dream is dying, suffocated by needless self-doubt.” He concluded that Britain is “truly headed for the status of colony.” Davis merely claimed May’s plan was “weak.”
Undaunted, May quickly replaced the departing ministers — Dominic Raab is the new Brexit secretary and Jeremy Hunt is foreign secretary — and warned that her government would have to prepare for the “no-deal” outcome in which Britain leaves the EU without any arrangements. The European Parliament’s Brexit coordinator withheld judgment on the May proposal, noting that “the devil is in the detail.” He echoed popular sentiment in Brussels — and just about everywhere else — when be called the British process “a shambles.”
The resignations reopened discussions among British Conservatives about the fate of the May government, with pro-Brexit politicians demanding her resignation and calling her plan a betrayal of the Brexit vote. Despite their pique, there is no indication they can muster the numbers needed to unseat her, nor is there any sign that anyone among the Brexit supporters wants the poisoned chalice that is the prime minister’s office along with the responsibility of concluding the negotiations.
At this point, British divisions could actually help May, as it is reported that EU officials worry that too hard a line could undermine her government. Nonetheless, the gap between London and Brussels remains profound and Europe will never agree to a deal that makes hard-core Brexit supporters happy.
Regardless of the outcome, great damage is being done to Britain already. Businesses need clarity and stability to make plans and Brexit negotiations promise anything but. Since the 1980s, most Japanese companies have looked to Britain as a gateway to Europe. The result is more than 1,000 Japanese firms doing business there, and they have created nearly 160,000 jobs. Japanese automakers manufacture about half the cars produced in the U.K. and 80 percent of them are exported, and 54 percent of these exports end up in the EU. That trade is two-way: More than 60 percent of car parts assembled in the U.K. come from overseas, including the EU.
Eliminate or limit access to the European market and those investments no longer make sense. Facing great uncertainty about their future, they will not wait to see what finally is decided. Companies will make decisions now and hedge against potential losses. Howls of righteous indignation from Brexit supporters are doing more damage than they can imagine, reducing London’s leverage and raising the stakes.