Brexit: Past the Event Horizon

A Brexit crash out looks baked in. Johnson has stuck to the path we deemed most likely: first making a show of meeting EU leaders and then engage in negotiation theater to keep up the appearance that a deal might be possible so as to keep Parliament at bay.

But even with Johnson overplaying his hand via his proroguing stunt and jolting the opposition into a higher gear, the odds seem awfully slim of steering out of no deal Brexit. And the irony is Johnson may actually believe that he’s engaging in brinksmanship that will force the EU to capitulate to the UK’s demands on the backstop. Or that his Government, chock full of Project Leave campaigners, really is grotesquely incompetent even by the low standards set by Theresa May’s ministers (of which Johnson was a prominent member)

The very fact that not much is happening save a lot of posturing by UK pols is a sign that the action is taking place in the wrong theater. To recap what most of you likely know: last week, Finland and France demanded that the UK present its proposals for the Irish backstop by September 30 or not bother. This is a wee bit more serious than you might think, since the Finnish Prime Minister is now the head of the EU Council. And in fact, this deadline is later than the time it would take to negotiate a deal (charitably assuming the UK served up something workable) and get it in final enough for for the EU Council to consider it. In other words, in the highly unlikely scenario that the UK and EU were on track to a new arrangement, it’s inconceivable that it would be finalized, approved by the EU Council, and then approved by the various parliaments where approvals were necessary by October 31. Johnson would need to get an extension, which would be a Brexit Party wet dream.

Johnson is not so clueless that he has missed the timing problem. From Richard North:

Alexander Boris de Pfeffel Johnson is said to have told colleagues that he did not expect to find a “legally operable” solution before the crunch talks with the EU on 17 October, the date when a deal is supposed to be put to bed.Johnson is thus suggesting that both sides will need to flesh out details after the European Council, leaving the EU having to agree in principle a deal without knowing the details. One can see that going down about as well as a bucket of cold sick.

There was further confirmation that Johnson isn’t serious about negotiating with the EU, or is deluded enough think the EU is willing to break the Single Market because the UK insists on it. Despite the bluster about not being bullied by meanie France and Finland, the UK did show up in Brussels last week with what it said were backstop proposals. Sort of.

The dismissive way that the UK’s Brexit negotiators treated their EU counterparts suggests that they aren’t just going through the motions for the benefit of the domestic audience. They might also be trying to goad an EU official to make an angry remark which would then be spun as EU bias or desperation.

The UK has regularly served up Brexit position documents that were embarrassing by virtue of having a lot of puffery and very little substance. But May’s team at least tried to maintain appearances. By contrast, the UK apparently made a big point of calling its offerings informal discussion papers, or “non papers”. And non-papers they were! There were only three, one page each.

If that wasn’t arrogant enough, Barclay, in a meeting with Michel Barnier drove the point home with demands that were obvious non-starters. After the France/Finland pressure for September 30 proposals, Barclay asked to have until the end of 2020 to sort some things out. Ahem, in negotiating a complex deal, some items wind up being traded against others, and accordingly, Barnier said more than once, “Nothing is settled until everything is settled.”

Moreover, the UK demanded that its napkin-doodle documents be treated as state secrets, with distribution limited to the Commission’s negotiating team as “Her Majesty’s government property”, meaning they be withheld from EU 27 diplomats. This looks to be another move to annoy Brussels and throw sand into the gears.

Oh, and the UK asked for huge waivers….just because (as in no concession was offered). From the Financial Times:

The commission told diplomats that current UK proposals “fall short of satisfying all the objectives” the backstop was designed to achieve, according to a diplomatic note seen by the FT.

The commission told EU27 diplomats that the British proposals amounted to the UK getting huge carve-outs from EU single market rules by allowing for customs checks away from the border and on the site of companies. The UK also wants new simplified electronic trusted trader schemes to operate across the Northern Irish border.

“These ideas are not compatible with the EU custom codes” said the commission.

Mind you, we’ve seen the UK do Groundhog Day for the better part of Theresa May’s time in office, forcing the EU into creative variants of “What about ‘no’ don’t you understand?” So it is remotely possible that this lot doesn’t get it. But it’s still hard to believe that people who can fake competence well enough to get elected are that thick.

However, Johnson’s moves seem less illogical once one appreciates that for him, hoping the EU blinks and accepting a no deal if it doesn’t is the best option. His only theoretical alternative, the so-called “sea border,” is a non-starter. From Jonathan Lis in

There is no replacement for the backstop which will satisfy everyone’s red lines…

That is why the only realistic solution in the time-frame is the one suggested by Brussels from the start: a Northern Ireland-only backstop. It’s the only deal Ireland will agree to. It’s the only deal ready to sign off. And it’s the only deal that comes close to solving Johnson’s predicament. Sadly for the prime minister, this deal will also destroy him….

So what happens if Johnson finally relents and brings it before parliament? Put simply, it disintegrates. The DUP could never support it in its current form….

The DUP’s hostility would also provoke serious consternation on the Tory backbenches. It is, after all, named the Conservative and Unionist Party, and it is hard to see how they might back a deal which Theresa May insisted (and Johnson agreed) no British prime minister could ever accept. It is not just the ERG which would rebel. More moderate Tories would also join battle.

Johnson therefore needs to bring over supporters from the other side of the House. It is hard to see from where. The SNP, Lib Dems, Change, Plaid and Greens, along with a few of the purged independent Tories, are not going to vote for any Brexit deal. The Labour leadership would only ever whip for one with a confirmatory referendum attached to it. Now there is a law effectively stopping no-deal on October 31st, several of the would-be Labour Leavers would also feel far less pressure to back it. Who wants to tell their constituents that they signed up to a Tory Brexit, saving Boris Johnson’s skin, for absolutely nothing in return?

Johnson’s woes would not end there. Faced with a May-style ‘betrayal’, the Brexit hardliners would quickly move to defenestrate him. Steve Baker and his ERG colleagues owe Johnson no personal loyalty and have no direct interest in seeing him remain as leader. Johnson could quickly face an internal vote of no-confidence, probably at the same time as Jeremy Corbyn launched one in parliament. Needless to say, Nigel Farage would enjoy every second of it, and capitalise to the full in the ensuing election campaign.

Via e-mail, Clive confirmed this take:

Even if the EU27 would go for it, there’s no way the currently-constituted UK Parliament would vote anything through right now because if the Conservatives put forward an all-Ireland solution, no matter what that was, the other parties would be bound to reject it because their policies are either cancel Brexit (the Liberal Democrats) or some flaky notion of a closer “alignment to the EU” (Labour). Neither the Liberal Democrats nor Labour would give political air cover to what they’d much prefer to label as “the damaging Tory Brexit”.

Which kind-of proves that the UK isn’t negotiating in good faith. No matter what Labour or the Liberal Democrats say, the reality is they’re resigned to some sort of Brexit or at least, if not now, then it being a perpetual insoluble political issue for them — so it might as well be the Conservatives who get to be the dog that caught their car and then have to take the flack for it.

But haven’t we ignored that Supreme Court case, that could find that Johnson misled the Queen? Even so, it’s not clear that its presumed remedy, getting Parliament back in session, would make much difference, although the optics would be terrible for Johnson. Parliament has already taken its big shot with the Benn Act, which requires Johnson to seek an extension to January 31 and to come back and get Parliamentary approval if the EU serves up something different.

Johnson has already said he plans to defy it, and his team is looking at ways to fake comply. It’s entirely possible that Johnson could send in a note that says, “I’ve been ordered to ask you for an extension and here is why you shouldn’t give us one.” He could go through all the polling math and other reason that there isn’t a Brexit consensus, and dragging things out will just create more uncertainty for business as well as keep the UK as a pest in the European Parliament. The EU can be in the business of giving the UK never-ending extensions, or can put the UK out of its misery.

Of course, the EU would still likely give an extension even with a missive like that, but you can be sure it would be short, and maybe not even to January 31 as requested to make the point (a crash out over the relatively dead beginning of the year period might not be bad save for it being the period of lowest liquidity in the financial markets). And if UK MPs try to do an end run around the Prime Minister, the display of constitutional disorder would not inspire the EU to give the UK any more than a short lifeline. Of course, the UK would get a new chief negotiator and a new European Commissioner, the current EU Council head, who is in place through the end of the year, is not in their favor. Belgian Prime Minister Charles Michel takes office on December 1. Michel is thick with Macron and Macron is the lead hardliner on Brexit.

Another variant is the “Parliament takes back control” battle cry. And how does that work, exactly? The current caucus shows Labour can’t even agree on Brexit. There are too many anti-Brexit themes that various interests have adopted for Parliament to drive the bus in any direction. The EU has to recognize this. Thus while it will politely accept meetings from anyone in a sufficiently influential position, it’s hard to see the EU being keen about dealing with Parliament, even if it were able to find it procedurally valid under EU rules. It would be guaranteed to be more shabolic even than dealing with the May and Johnson governments.

Yesterday in comments, PlutoniumKun pointed out:

It’s becoming more and more clear that Johnson is not interested in serious negotiations, he thinks a no-deal will favour him – and given the way Corbyn and the Labour party seem determined to shoot themselves in the foot at the wrong moment, he may be right. All things considered, the Tory Party is still doing remarkably well in polling and could well win an election, despite all the evidence of depravity and incompetence.

I don’t normally have the stomach to read much British right wing media but I had a browse through a local newstand yesterday and even allowing for the fact that the Irish editions of those papers are heavily edited to remove anti-Irish content, the mendacity is stunning. The millions of Britons reading the Mail, Telegraph, Sun, Express, Times are being fed completely fictitious nonsense. Apparently the EU is on the verge of giving in and presenting Boris a victorious new deal and only the evil Irish and French and Spanish could stop this (or something like that, they don’t really make much sense). Read them and then compare with the linked article – its two entirely different worlds.

This degree of misrepresentation matters because it sets up smaller and even some larger businesses in the UK to continue to be woefully underprepared for a crash out. And the persistent “Blame the EU,” which has been a staple of Tory politics, is sure to become a new cry when Brexit dislocations become painful. Surely this can’t be how it was destined to go; the EU must be deliberately sabotaging the UK.

I’d love to be wrong about the last point. Do any readers have a window on the state of UK preparedness? The big banks generally seem to have it fairly well in hand but they are famously bloody-minded about hiring and firing and appear to have though about the needed staff and legal reconfigurations early on. That does not necessarily mean they will all handle a sterling crisis well.

Any anecdotes or data on UK business preparations for Brexit appreciated, and particularly whether they see an October 31 crash out as odds on.

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    1. fajensen

      Hm! Let see. Establishing FEMA camps represent, at some level, the assumption of responsibility for people (at the very minimum for those people going into the camps).

      So far everyone has spent the last 3++ years doing nothing but feverishly dodging any kind of responsibility.

      Therefore, I doubt that the trend will be broken and anything like that ever done, even if those camps were to be established in order to round up those Traitors, Saboteurs and Remoaners that are stuffing up Glorious Brexit!

  1. PlutoniumKun

    Thanks Yves, excellent summary of the state of play as always.

    I’d just add one element to the mix that so far as I can see the Irish/EU strategy now seems to be based on what Fintan O’Toole called the ‘Caligula’ option for the Irish Sea Border (i.e. Northern Ireland only backstop). The Caligula reference is to the story where Caligula got cold feet on his march on Britain, stopping instead to get his legionaries to collect sand and shells from the beach, which were brought back to Rome as evidence that he fought Neptune and won). The scenario would be that officials on both sides would present him with a potential deal which would be sweetened by the Irish/EU essentially saying ‘ok, you got us, we give in!’ Bojo then returns in triumph, delivering the WA that the EU wanted all along.

    The problem of course with that option is that Bojo still doesn’t have the Parliamentary numbers. I think the calculation is that just maybe some Labour and SNP could be persuaded to support it on the basis that it could allow for less contentious negotiations in a future government – the SNP might even be persuaded it would create a model that could allow them to go for Independence and rejoining the EU. A long shot of course, but I think its the only possible way a deal could be agreed.

    Solely on anecdote, I think there is still a feeling within small to medium sized UK businesses that Brexit won’t happen on 31 October, they think there will be some sort of delay or deal. I don’t think they’ll be well prepared.

    1. Redlife2017

      The IA (Investment Association – the UK Asset Managers business association) is continuing to pound their fists about no deal Brexit, sending out regular missives about needing to get ready. Even with the Benn Act.

      I was at a large Asset Manager’s conference in London last week where a speaker was a former Tory MEP. She felt that we would somehow get a deal during her speech. However, once she was asked pointed questions, she noted that the bankers will be fine because they always find ways to make money. It’s the regular people who will suffer. She then mentioned that she had to completely leave politics and go back to working at a Big 4 (KPMG) because of what has happened to the political situation in the UK. She is proudly a One Nation Tory.

      I’m mentioning the above, because what is happening is that the Tory party is truly jettisoning anyone who isn’t a radical (not just on Brexit – but also VERY radical economic / social policies). And the LibDems are no help in this, as they are radical on Brexit and are just to the left of the nutters on economic / social policies. It’s like we now truly have the Republicans, Democrats, and the DSA as our 3 main parties.

      I’m also very worried about the Labour Party. The split will be ugly – from what I can tell it is baked in. I almost retched when I saw what Corbyn got the NEC to approve. Yes, let’s just make this part of Brexit go on FOR EVER (and yes, I know that this is going to go on forever, but we haven’t even finished Chapter 1 of a 27 chapter novel, guys). The addition of getting a Special Conference together is insane. Holy Crap – didn’t we just have 2 years to have one? We keep changing our policy every [family blog] month. AAAAHHHH! I was speaking with a very good friend today who is a LibDem and he just looks at what Corbyn did and said – “Now that’s a way to sit on the fence.” Quite honestly I’m glad I missed Conference season this year as I have enough stress in my life!

      This country is going to go down the hole in short order.

      Two quotes from Dr. Thompson to get me through the day. We pine for the leaders of yesterday:

      “Richard Nixon looks like a flaming liberal today, compared to a golem like George Bush. Indeed. Where is Richard Nixon now that we finally need him?”

      And this is my bedtime meditation:

      “No, it was too much. The line between madness and masochism was already hazy; the time had come to pull back … to retire, hunker down, back off and “cop out,” as it were. Why not? in every gig like this, there comes a time to either cut your losses or consolidate your winnings—whichever fits.”

      1. coboarts

        The larger trends that are coming out of the smoke and mirrors Brexit are what interest me the most, and I think you’ve got your finger on it. It’s the political reordering. Being a Californian, I’m always hearing about how we lead the nation in setting trends, but since the time I spent in the UK (late 70s) it has seemed to me that UK is the leader concerning the larger trends that will settle into the USA.

      2. Bugs Bunny

        Back in the good old days of the Internet, I really enjoyed Thompson’s rudimentary yellow background, black type, website. He posted stuff pretty frequently and his reflections were cranky and sometimes reactionary to a fault, but pretty funny and astute. The man is missed.

  2. vlade

    “or is deluded enough to be willing to break the Single Market because the UK insists on it”
    I assume meant “enough to assume the EU be willing”

  3. vlade

    There seems to be a lul where most of people assumed something will get sorted because the Parliament got one over Johnson (possibly more if the Supreme Court rules against govt, which seems quite possible – if the court strongly felt it was not judicable, it’d say so on Friday already IMO, and didn’t spend so much time on possible remedies).

    But as you say, it’s still in pretty dangerous territory – just have a look at the Labour party, which is tearing itself apart very publicly, and that’s when some polls put it behind LD.

    As on extension – I do not believe the EU would give Jan 31 extension. The only reasons for extension are:
    – new elections, extension till end of Nov will suffice (any govt with majority can ask for a new extension then, if applicable). It also avoid the totally dead period in markets from second half of Dec till first week of Jan, while still having a lot of the first month in a quiet period for import/exporters.
    – referendum or new red-lines and renegotiations. Extension at least till end of 2020, more likely 2021.

    Nothing in between makes sense IMO.

    1. PlutoniumKun

      Ah yes, the other wild card at play is the party conference season. Labour, once again, show their complete lack of strategic thought by planning to host a civil war right in the middle of the Tories crisis. Bojo should get an easy enough ride in the Tory conference, but Corbyn is likely to be badly damaged.

    2. Yves Smith Post author

      Yes, I agree the body language of the EU is that it would do shorter and I probably should have unpacked that more. Experts (before the Benn Act Jan 31 date) were suggesting year end, because it would be past the Christmas selling season, although I can see the logic of only one month.

      And one month might also focus Parliament’s mind: it’s either the WA or a GE to buy more time and change the players or no deal. I can see the notion that longer than one month sends the wrong signal.

      1. Ignacio

        The EU has to prepare its budgets for 2021-2027 preferably before January. One way or the other brexit will have proceeded before december 2020. This gives some relief…

  4. Ignacio

    Something that makes it difficult to be prepared for a no-deal brexit is uncertainty regarding UK government ruling after brexit. I have been loosely following brexit concerns in the poultry and meat industry and what I have read indicates that preparedness is difficult. There are issues that can be easily foreseen and I guess these can be fairly well prepared in advance. For instance,the BBC warned in february that NI’s poultry industry faces a waste problem. Other issues regarding commerce with the EU and the rest of the world face uncertainties. For instance, the UK government has announced that in a crash-out event tariffs on poultry products (sanitary controls?) would be removed to prevent price spikes. This move might end killing many UK based farms unable to compete with cheaper products. How can you prepare to that? Having the bankruptcy form already filled?

    So far it seems that Insurance companies have prepared to 31st october no-deal brexit by stopping to provide insurance to deals scheduled after this date.

    “Insurers that cover these consignments and facilitate the movement of goods between countries are refusing to indemnify against losses related to a non-deal Brexit. Couple that with a volatile exchange rate, mooted border delays and complete uncertainty surrounding whether Brexit will even happen on 31 October means the obvious solution for EU buyers is to source product from elsewhere.”

    EU buyers migth have and alternative, but UK producers?

    1. Clive

      This is a good example of why it is, here as always, instructive to ask “where’s the ‘bezzle?”

      One project which I know got commercially funded was for the import of perishable fresh fruit and vegetables (primarily from north Africa and the Mediterranean) by sea (rather than by accompanied transport which is the default modality at present). The consignments are packed into reefers (under dry nitrogen I believe) and are picked before-ripe and are, in effect, in stasis for the duration of the (lengthier) sea voyage. They are ripened during the last day or so of their (domestic) UK transport leg. This was quite capital-intensive, as new port facilities were needed, the reefers of course, and the shipping charters which had to be long-term as the routes and the turnaround was bespoke for this consignment. But the business case was a no-brainer.

      The quality, in terms of an eaten-fresh product, is poor (I know, I’ve bought them in the supermarket as I know the supplier’s EU or authorised 3rd country origin code). But for cooking / chain restaurant / commercial catering purposes, they’re acceptable. And the costs are very low, compared to what is, after all, a very high-cost option for road distribution. Historically, the market for such produce, while it did exist previously, was limited because a higher quality “premium” product grew to dominate the market (vine ripened tomatoes, for example, displacing the shipped unripened fruits which were the previous out-of-UK-season take-it-or-leave it version), not least because margins for retailers were much higher on the higher-quality items. In an example of anti-Gresham’s Law, good quality products forced out bad (albeit at higher prices).

      Now, though, the supplier who can ship — with a guarantee of delivery — is making out like a bandit. They can charge pretty much the same as the current “premium” produce (shipped by road haulage) but for a much less costly to produce product that is also about a quarter of the cost for shipping and handling. There’s less wastage, too, as the shelf life is measured in weeks, not days. Every time there’s a “chaos at the ports” story run, the supplier’s phone rings with some new customer asking about forward pricing and availability for the key Q1 ’20 winter-coverage slots. I am given to understand that they are perfectly content to let industry associations feed this ready market for fruit and vegetable supply doom as much as they can — you’d have perhaps thought they might like to offer reassurance and open up their advertising to make their “safe” option as widely-known as possible.

      But then again, why bother? They don’t need to spend a penny on advertising at the moment, and despite availability being no problem (there’s plenty of supply given that, within Europe at the moment, the unripened fruit and vegetable trade is a tough sell as fully-ripened or almost-fully-ripened is what’s in big demand because the market for fresh items has switched to the quality end) — customers are convincing themselves that they’re “lucky” to have got a supply contract in place, at any price.

      I could tell a similar tale of frozen butter for a big dairy producer / consumer in the south of England (I didn’t include the details here as my knowledge on that one isn’t quite so good, and it turns of POAO (Products of Animal Origin) EU rules being an impediment at present in a way that I don’t fully understand). I wish I did know more of the details because I was given an impression that a lot of the cross-border traffic between NI and the Republic — which seems to defy any semblance of economic logic — relies on this carefully constructed (constructed by the industry, I hasten to add) POAO Directive plus a combination of farming subsidy and taxation arbitrage. This would explain some of the howls of protest in the NI agri-food sphere if correct. The dairy company (certainly the part of it that is a big consumer of dairy, less so the bit that is a producer) can’t wait for the day when they can process frozen butter as if it were fresh.

      Summarising, as much as I can, anyway, it’s possibly going to be a case of winners and losers.

      1. Ignacio

        Thinking about your example and your conclusion it came to my mind a division into two kinds of preparedness: The problem-solving preparedness, and the ‘how I am going to profit from this’ preparedness. My intuition is that many of the ERG types may have done plans of the second type. For instance by preparing initial political measures that would facilitate their plans (liberalization plans) followed by protectionist rules once they own the production means. Is this too paranoid?

        1. Clive

          No, I don’t think so. There’s no shortage of verifiable examples, such as the dairy processing industry in Northern Ireland complaining about capacity restrictions but at the same time closing down capacity.

          It’s hard not to conclude that there’s an element of inducing artificial scarcity then profiting from the inevitable calls for “industry support due to disruption”. After which, exploitation of the newly constrained supply-side environment would be an obvious opportunity for further fun and games. Put it this way, an industry which is simultaneously complaining to the UK Parliament about dairy business infrastructure curtailments:

          107.One example of this type of integration is the dairy sector. We heard from Dairy UK that around 30% of the raw milk that is produced in Northern Ireland is transported to the Republic of Ireland to be processed.196 Dairy UK told us that Northern Ireland does not have the processing capacity to handle all of the raw milk produced on its own dairy farms, and that only by making use of the processing capacity available in the Republic could it meet customer supply requirements.197 William Irvine told us that his Armagh-based farm supplied its milk to Lakeland Dairies, a co-operative based in the Republic. He told us that Lakeland owns production facilities on both sides of the border, but that his milk was processed in Kildallan in County Cavan.198

          … but then also intentionally removes processing infrastructure, is obviously up to something.

          1. d

            Raising the price. …because of the shortage…who knew that would happen. Happens in the oil industry, they would shutdown refineries, and gas prices would shoot up.

      2. d

        Not that frozen fruit is all that good we get a lot of that during winter months, but most of it I pretty rank. And expensive too, compared to the California fruit we get during late summer and fall

  5. Ataraxite

    Thank you, Yves, another fine summary of the depressing state of play.

    My own take is that the current UK government is trying to antagonise the EU into refusing an extension. The unrealistic negotiating demands, the outright rude request that their half-baked ideas not be shared with the EU27 member states. I don’t believe that these people are dumb enough to think they’re somehow going to get a deal. They know what they’re doing. Whether the EU is goaded into refusing an extension remains to be seen, but they only need one member state to refuse.

    Beyond this, I don’t think the current supreme court case over prorogation is actually that consequential. Even if the court forces parliament to be recalled, what is it going to do? They’ve “ruled out” no deal, but are no closer to grappling with the Brexit Holy Trinity: May’s Deal, No Deal or No Brexit. The unicorn breeding program in the House of Commons is still in full swing.

    I honestly don’t know what will happen. It is, as they say, a dynamic situation.

    (Regarding preparedness: I was in the UK for a few days last week, it seemed to be business as usual everywhere.)

    1. PlutoniumKun

      I’d agree that the UK seems to be actively trying to antagonise the EU – I’m not sure if its specifically to rule out an extension or just to set the ground whereby the EU can be blamed for everything.

      I think most in the EU would welcome more preparation time, but I think there is less and less enthusiasm for more extensions. Even in Ireland, which is desperate to put off the day of reckoning, the government seems to be realising that an extension into 2020 could run into a projected election in May 2020, so would prefer to have it over and done with. I’m not sure about this, but I suspect Varadkar thinks he may do better in an election in a time of crisis, as Irish electorates historically tend to go more ‘with the devil you know’ when times are uncertain. I suspect other European governments are making their own electoral calculations as well, and may well conclude that its better to lance the boil quickly. No European government is likely to suffer electorally from being seen to be tough on the UK, even in the traditionally anglophile countries.

      1. Pavel

        or just to set the ground whereby the EU can be blamed for everything–PlutoniumKun

        Bingo. Johnson seems to me a mixture of buffoonery, cynicism, incompetence, and sheer deceit but he is politically wily enough to understand that the best conceivable outcome for him at this point is to escape the blame for the disaster that a No Deal exit will be. Neither does he want to incur the risk of his Leaver base by missing the October 31st deadline which he has vowed to keep so many times.

        So as many here have pointed out, he is going through the motions of negotiating whilst a-wishin’ and a-hopin’ that the EU is baited into doing something so No Deal can be blamed on them.

        The September 30th deadline by the Finns and French for a backstop alternative is just a week away. The other day on TV Boris was caught expressing his surprise (i.e. ignorance) at just how complicated the Irish border arrangements really are. We have had three years of kerfuffle from Boris, Rees-Mogg and other delusional Brexiteers about IT-based alternatives to a hard border but they’ll need something more than airy-fairy promises this time.

        What a time to be alive!

    2. Yves Smith Post author

      Yes, I have trouble with that issue too, whether the point of The Negotiating Stoopid is to piss off the EU or just a show for the domestic types. But Barnier is a real pro, so he’ll present in a surgical manner.

  6. Clive

    Re: Preparedness

    For finance, certainly the bits I know of, it’s all baked-in. A lot of analysis and planning has gone into the post-Brexit landscape and business models — and the regulatory carve-ups. Functions that need to be run from within the Single Market have been relocated, primarily to Luxembourg which will (perhaps only temporarily, but then again, perhaps not so temporarily) be allowed to run in the relative free-for-all manner that London offered, plus the, ah-hem, “competitive” taxation system there. A few, which need really big scale, will go to Paris. The majority would remain in the UK — the legal and regulatory framework was more conducive to the profit centres being kept in the UK even if they lose Single Market access.

    Any continuing delay is now just a negative for all concerned. The moves of the areas which need to move to EU27 jurisdiction have either already happened or are just about to happen — I know of several where notice has already been served to move teams on a specific date, with London staff being given the option to move but otherwise severed (not many are taking the “move” option). The retained business units which can function — and potentially be able to exploit — non-EU domicile are just waiting to start lobbying the UK regulatory regimes about what they’d like to see changes once divergence is possible.

    As noted in the piece, larger businesses have already done similar to big finance — made business process and organisational / legal changes. For SMEs, it is actually a new revenue stream for finance to fund either new EU27-based or new UK-based centres of operation — for those which think it will be worth taking that step. Some sub-scale UK-to-EU exporters are just abandoning that market, or will do, as the costs of operating outside the Single Market wreck the economics of doing it. It’s arguable, of course, whether these let’s-have-a-go-why-not? exporters ever should have been attempting to create an export opportunity given they primarily compete in low-margin areas and/or have little in the way of product differentiation thereby being only one step above commodities. I suppose this was the real benefit that the Single Market brought — the ability for the small fry to develop export business without the bulk of a large corporate organisation to manage it. This will be the main Brexit casualty — and possibly where the real long-term damage will end up lying.

    The same will, presumably, work in reverse (EU-UK trade for SMEs), although I don’t know that first-hand.

    Like it or not, the lines are already drawn. You’ve got Atlanticism for the UK (which of course is closely adhering to the other Five Eyes’ alliances and, cough, “mutual interests”) and perhaps Switzerland. Plus Japan. With all that that brings.

    Then you’ve got the EU27 and the remnants of the European ideal.

    These two will face off to Russia, of course. And China. With India perhaps “enjoying” autarky.

    No, it’s not exactly a recipe for world happiness and burgeoning internationalism. But what can you do?

    1. Irrational

      In terms of anecdotal evidence: we have seen enough houses being bought at – even for Luxembourg – stupid prices with cars with UK plates shortly thereafter, so some services are definitely moving here despite it not really hitting the local news.

  7. David

    I increasingly think that the current (and immediately future?) state of Brexit actually requires a different vocabulary and set of concepts from those we are accustomed to using, even when we discussed Europe. The reason for the unreality of a lot of media coverage is precisely this: commentators aren’t really equipped to understand what’s going on and where it might lead. Not being capable of employing the vocabulary and the concepts suitable for a major crisis, or even knowing what it is, they’re falling back into the intellectual habits cultivated over decades of writing essentially the same “UK at odds with EU” stories.
    The same is true, unfortunately, of our politicians. Most of them (including Johnson I believe) are stuck in a kind of dreamland, hobbled by stock ways of thinking and behaving. This is a government which has little intellectual or political maturity, which has spent its political life in an environment where management and PR were basically everything, and where Europe was no more than a whipping-boy for lazy right-wing demagogues. The semblance of activity from the UK (“non-papers” should have been tabled years ago) is a way of putting off the inevitable, kidding yourself that you are actually doing something, and surviving from day to day, hoping always that the school exam or the visit to the dentist will magically never happen. It hardly needs saying that, confronted with an actual crisis that can’t be spun away, that affects people even after they have finished reading their newspapers, the system will simply collapse, because it can’t manage grown-up problems. The only question is when this collapse will come, and that depends on the Courts and Parliament, and possibly other things the have not appeared yet.
    Cyril Connolly proposed what he called the Theory of Permanent Adolescence, to explain the behaviour of grown-ups who had been to boarding school. Essentially, he said, they never lose their adolescent attitudes and behaviour. Pity the nation that has schoolboys in control.

    1. Susan the other`

      Boris seems to fit that picture, of adolescence. But I’m guessing he’s adolescent like a fox. The fallback for the UK is us (here in the US); India; Hong Kong (there’s still some hope apparently); Australia and Indonesia. Never mentioned so far is their joint venture with Israel and the US to pipe Saudi oil to the eastern Mediterranean and on to the EU. That one enterprise alone could make the UK banks flush with money and trickle down for a decade or two. Interesting that the UK decided at this particular time – just before Armco oil goes full pipeline – to ditch the EU. Prolly planning to make huge profits selling to them. Which in turn will make trade a non problem. Just guessing in the dark. Otherwise it’s difficult for me to understand how the nation known for never suffering fools is behaving so foolishly.

    2. Tom

      > The semblance of activity from the UK (“non-papers” should have been tabled years ago) is a way of putting off the inevitable, kidding yourself that you are actually doing something…

      That very much describes the sense I’ve had. Incompetence + laziness + hubris + cowardice = delusion.

    3. Tony Wright

      David, that sounds exactly what is happening globally regarding the ecological state of the planet. And ignorance of ecology is even more widespread amongst politicians and others with their hands on the control levers than is ignorance of economic matters.
      Unfortunately most of us who are of an age to have most benefitted materially from the ever increasing degradation of the planet will not be around to reap the bitter harvest of our short-sighted and profligate efforts.
      However our children and their children will, if they survive at all, and as passionately and eloquently stated by Greta Thunberg over the weekend, “they will never forgive you.”
      Delusion and insanity are running riot on planet earth at so many levels: Climate Change, Species extinctions, plastic and rubbish mountains and pollution, negative interest rates, derivative markets in excess of $200 trillion, Trump, Brexit, Johnson, and many more.

  8. Irrational

    Just a tiny correction to an otherwise masterly summary of the current mess: the Finns are the current holders of the Presidency of the Council from July 2019 to December 2019, not the next ones (next is Croatia, then Germany).

    1. Yves Smith Post author

      Thanks, will fix. It never occurred to me the EU Council Presidency would have such a short current term, since Tusk held that position for years and he’s still being given press attention as if he were EU Council head. The problem of reporting on politics that you didn’t grow up with, you are constantly in learning mode and sometimes make bad assumptions. Will fix.

      1. Larry Taylor

        Sorry, Yves. Still not quite there. The EU Council Presidency, or Presidency of the Council of the European Union, is, as Wikipedia is quick to warn: ‘Not to be confused with President of the European Council or President of the European Commission’. The Council Presidency rotates every six months amongst all the EU countries; this is the position presently occupied by Finland. Donald Tusk is the outgoing (as you note, ‘for years’) President of the European Council.

        Funnily enough, the last time the UK held the Council Presidency was in 2005, when one T. Blair was PM. I recall that the British press, rather disingenuously, I thought, used to like to call him, personally, the EU Council President.

        1. Ignacio

          There it is. Council presidency is in fact asumed by a triad of countries for 18 months that have to work concerted developing the European Council program. Current triad is Finland, Croatia and Romania. Each 6 months one of these coutries assumes the main role, currently Finland.

          Can you imagine what is the second most important leit motiv in the current presidency?. It is a constant in all presidencies: making the EU more competitive.

          1. Ignacio

            Unfortunately little attention is paid to this organ. The Council sets priorities and I tend to think this is the most important institution in the EU. Because the language it uses sounds vague or generic it’s releases aren’t sexy. The press, obsessed with the day-by-day circus, doesn’t pay attention and doesn’t report. There is very little oversigth and literally no discusion about the priorities and main decisions of the organ. Some discussion arises at the Comission level that transforms EC program in directives.

            Brexit, for instance, requires “monographic” EC meetings and such meetings require time to program because of agendas and because there is no meeting without extensive previous documentation on the issue and time must be given to allow for proper assesment and parliamentary consultation, even approval, in different countries. That is why BoJo was given up to 30th september to present any plan. The fact that BoJo saw this as an extortion technique says a lot about the lack of respect he has for EU institutions and procedures.

        2. Yves Smith Post author

          I am very much aware that the head of the EU Council is not the head of the Commission. The EU Council members are heads of nation states.

          And it was my bad to forget that the head of the next EU Council is indeed close to Macron but is most assuredly not Finnish. It’s Charles Michel of Belgium, who takes office as of Dec. 1.

  9. Harry

    My friends in the Home Civil Service tell me that there was an urgent request for contingency planning for the hard Brexit scenario about 3 months ago from the Cabinet Office. This is very late.. The analogies they are using are all 2nd WW analogies. With one exception. The phrase “lions led by donkeys” has come up.

    1. EoH

      The number of contestants for the Field Marshal Douglas Haig Award will be breathtaking. But Banks, Farage, Johnson, Rees-Mogg, and May are likely to be front-runners.

  10. Silverfox

    Regarding preparedness, most FTSE 100 companies publish the status of their preparedness.

    Here is the 11 page PDF of Next Plc’s preparedness:

    They’ve helpfully detailed everything new in red, and the big development seems to be the Govt’s Transitional Simplified Procedures, which simplify the handling of imports. Anyway their analysis is a good read and they go into some detail about direct and indirect risks and what they’re doing about mitigating them.

    All businesses are doing these types of risk analysis. I think remainers hoping that businesses are just sitting on their hands in order for the aftermath to be a total mess, are over-estimating business desire to take a hit to prove political points.

  11. Anonymous 2

    One question is how long Johnson can stay Prime Minister. If the Supreme Court finds him to have misled the Queen there will undoubtedly be calls for his immediate resignation. He will doubtless seek to ignore them.

    If readers want an indication of how far and fast the UK has fallen, another story today involves allegations of possible misuse of public funds by Johnson. Reportedly when Mayor of London he arranged for £126,000 to be paid to a young female friend of his. He is said to have made frequent visits to her private apartment.

    Readers are left to draw their own conclusions. It is said the young woman concerned had a pole dancing pole in her sitting room.

  12. J Neudorf

    What are some scenarios for Prime Minister Johnson’s malicious compliance/noncompliance? I can picture him tossing a letter into an ordinary non-priority international mail, during a side-trip to Italy (Quora says it has awful mail service). In which case it might reach the President sometime in November. He might further confuse things by asking other Brexiteers to send letters of their choice to the President, with their thoughts.

    Or, alternatively, not send the letter, order the justice department not to get involved, and require Parliament to lock him up in the “clock tower of the Palace of Westminster” … Big Ben. Apparently this hasn’t been done since 1880.

    I’m curious about the more bizarre and fantastic ways things might play out.

  13. flora

    Hard not to see BoJo (and his backers) as a simple minded nihilist wrt the western project., though he can not grasp the comparison. Ironic that he thinks he emulates WC who was never a nihislist, imo. Tragedy writ large.

  14. RBHoughton

    Might there be a sub-plot here with the Anglosphere expecting some geopolitical advantage in pushing Europe closer to Russia?

  15. korual

    The whole point of the Benn act was to change the timetable so a vote of no confidence could be brought without Johnson timing the election to after the Brexit date. This is still possible, the prorogation being a bit of a sideshow. Oct 19 Johnson is legally obliged to ask for an extension and the EU will oblige in the knowledge that a VONC will follow. Election is then on before Brexit date in December, dealing a new set of cards. The latest poll: in the event of an election after an extension, the result is almost a 4 way tie with Labour in the lead.

      1. FKorning

        He really should. Or the queen should sack him. All 11 chief justices just ruled the prorogation to be unlawful. But the prorogation was sanctioned by the monarch. Either the crown is in contempt of the law, or the PM’s advice is in contempt.

        1. Clive

          The Judgement (which anyone who wished to comment sensibly should read for themselves) makes this entirely clear. The Crown is not in contempt. The sovereign acted on advice from Johnson and the advice was unlawfully constructed.

          The PM is not in contempt of anything. Parliament is “un prorogued” as it it was never prorogued int he first place. If Johnson wishes to prorogue it, it must be done in a way which is compliant with the Supreme Court’s judgement — it cannot be done with a view to stymieing Parliament.

          If Parliament wishes to remove Johnson as PM, it can. Just as it could have, but never did, remove May.

          What Parliament will actually do (as opposed to various MPs getting their mugshots on TV talking about how awful it all is) — that’s where it might get more interesting. On the other hand, Parliament might just as well go back to its previous grandstanding.

  16. robert dudek

    Remainers: Boris Johnson is not fit to be prime minister.
    Johnson: Okay, bring a no-confidence vote and form a new government.
    Remainers: No thank you.

    This is like a game of chess between two players who are both trying to lose.

    1. FKorning

      No. Before this, he could claim to be judged in the court of public opinion or by parliament.
      That is no longer the case. This is a *unanimous* final ruling by the canon law of the land.

      The UK sorely needs a constitution. But if there is anything consistent in its broken system,
      it is the absolute rule of the courts. It it is a mercantilist country. Rue of Law is everything.

      1. Clive

        Have you actually read the Judgement? I can heartily recommend it, if anyone wishes to make a sensible comment on this

        39. Although the United Kingdom does not have a single document entitled “The
        Constitution”, it nevertheless possesses a Constitution, established over the course
        of our history by common law, statutes, conventions and practice. Since it has not
        been codified, it has developed pragmatically, and remains sufficiently flexible to
        be capable of further development. Nevertheless, it includes numerous principles of
        law, which are enforceable by the courts in the same way as other legal principles.
        In giving them effect, the courts have the responsibility of upholding the values and
        principles of our constitution and making them effective. It is their particular
        responsibility to determine the legal limits of the powers conferred on each branch
        of government, and to decide whether any exercise of power has transgressed those
        limits. The courts cannot shirk that responsibility merely on the ground that the
        question raised is political in tone or context

        The UK does have a constitution, thank-you very much.

        1. FKorning

          With all due respect, that paragraph states the opposite, The vaunted “flexibility” in all its civic institutions has played no small part in sinking us deep in the current quagmire. Modern nations ought not be governed by winks, nods, shoulder taps, and secret handshakes

          1. Clive

            I’m not sure where you learned to read. A paragraph which starts out “it [the UK] possesses a Constitution” cannot be read in any way to suggest that it says the opposite (the UK doesn’t have a constitution). Perhaps if I were to write “water is wet”, you’d happily come along and say that what I actually wrote was “water is dry”?

            But then, hey, who knows best about UK legal and constitutional matters? 11 Supreme Court justices, or FKorning?

            I fear that I (and they) would have no choice but to crumple, in the face of your piercing and intense logic, reasoning and citations from reputable sources. Oh, wait a minute…

            1. korual

              The UK constitution is constitutionally dialectic, or as commonly known, it is “unwritten”. No single document, but always open to reinterpretation. Which was just reinterpreted today.

                1. korual

                  Absolutely yes, I agree. Unwritten is a word that I’ve not seen in any other context, but it resonates with the term dialectic, which is common in philosophical or linguistic contexts.

                1. korual

                  Unworn, but not invisible. Clearly there is procedure. Reduce subjective interpretation? There are 11 judges that just subjectively and unanimously reinterpreted the constitution.

              1. FKorning


                You are a regular contributor here, but that’s out of line.
                You’ve resorted to: name-calling. ad absurdo. ad hominem.

                Really, it’s time to have a cup of tea and a time-out.

          2. vlade

            Actually, technically Clive is right – the UK does have A constitution.

            The problem is, no-one really knows what it is until you start looking very very closely and/or challenge in the court. And, finally, the fundamental principle says ‘but if Parliament disagrees, it can get what it wants’. So you’d also say that the whole UK’s constitution is one sentence – ‘Whatever the Parliament agrees on’.

            IMO, it would be better to codify it more – but we have to understand that both current form and codification have advantages and disadvantages, and ultimately, both depend on the cultural and social system around, and willingness of the system to adhere to the rules. A written constitution is just as worthless as a gentlemen’s agreement one if it can be safely ignored.

            Ultimately, all rules are just rules, which are nothing withouth the people around.

        1. robert dudek

          I’d also like to point out that it is the Monarch that prorogues Parliament.

          It doesn’t make logical sense to me that the court can dictate to the Monarch what is lawful.

          IMO this is evidence that having a Monarch with “ceremonial” powers makes no sense.

          1. Clive

            Her (in the current case) powers are very real. It was the sovereign who had the power to prorogue Parliament. However, her powers are exercised on advice from her ministers. If her ministers give her advice which is judged to be unlawful (such as here, where the advice purported to be one thing, but was found as a fact by the UK Supreme Court to be something else entirely) then the exercise of her power was nullified.

            It is open to Johnson to advise her, lawfully this time, to prorogue Parliament. If the sovereign agrees, Parliament has to be prorogued. The sovereign’s power is ultimate, no court could overturn this. So long as it is on a lawful basis.

            It’s nicely circular, but there it is. It’s called a “constitutional monarchy”.

            We can argue all day about the benefits of a republic. I’m not entirely convinced that in, say, the US, this works any better for the good people of that nation. Neither am I sold on the way the EU works with the (triumvirate? is that a word?) of the Commission, the Council and the Parliament. But you pays your money, you takes your choice.

            1. FKorning

              No. The courts can overrule the sovereign and have on multiple occasion from the day of magna carta on. the very judgement you cited quotes many an example of this.

              32) The court concluded at p 76 that “the King hath no prerogative, but that which the law of the land allows him”

              1. Clive

                Yes, the courts can overrule the sovereign. Within the limits of the constitution. Hence, “constitutional monarchy”. Thereby proving that the UK has a constitution.

                So I take it you’re now happy to recant your original statement, “The UK sorely needs a constitution” — since you’ve just confirmed how it limits the power of the sovereign to something less than an absolute (and must therefore exist)?

                Or, alternatively, re-word it to something like “What I think the UK sorely needs is a written constitution…”. Then, we might get somewhere.

          2. korual

            The court dictated that the advice to the monarch was unlawful. The PM unlawfully advised the monarch. Boris lied to Elizabeth.

                1. robert dudek

                  No it isn’t. The court ruled that the effect was such that it interfered with the proper functioning of Parliament. That is why they termed it unlawful. The court said nothing about Johnson’s motivation.

                  1. korual

                    Yes, the court said nothing about Johnson’s motivation. It can not be proved. But only the most naive believes he prorogued parliament for 5 weeks because he needed to think really hard about what to do for the next sitting. The court mentioned “4 to 6 days” as being normal.

                    1. robert dudek

                      Yes, but what is logical to believe (I myself agree with you) and what a court says are not the same.

  17. bob

    The UK has a “constitution” and the UK is seeking relief from the European Union based on the god given supremacy of a German monarch.

    The emperor has no clothes

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