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Analysis

May’s deal won’t stop the Brexit uncertainty

by Luke Lythgoe | 12.11.2018

Theresa May’s Brexit deal is being sold to businesses as a way to end Brexit uncertainty. Yet the lack of clarity about what will be the long-term future relationship with the EU means that uncertainty is hardwired into May’s Brexit plan. The best way to give businesses the certainty they need is by sticking with the deal we already have with the EU – and the most democratic route to that is a People’s Vote.

The chancellor has predicted a “deal dividend” based on uncertainty ending when a withdrawal deal is struck. He misjudges how businesses will react to the prime minister’s proposals. We would spend years working through difficult questions on our future trade relationship with the EU – with who-knows-what result at the end.

Since the vote in 2016, we’ve seen what Brexit uncertainty can do to our economy. Our productivity growth has halved and business investment growth is down 6 percentage points, according to a new survey of 3,000 firms by economists at Stanford and Nottingham universities. Meanwhile a tumbling pound has pushed prices up in shops. And uncertainty about EU workers’ post-Brexit status has seen sectors from health and hospitality to construction and catering hit by labour and skills shortages, analysis by HR body the CIPD shows.

But why would businesses think May’s increasingly convoluted Brexit will alleviate this uncertainty? She’s offering only the vaguest outlines of a future relationship with the EU, all of which needs thrashing out after we leave the bloc. The transition period – where our trading relationship with the EU will stay the same – is only guaranteed for 21 months. That is almost certainly too short for the government to negotiate a final trade deal. And businesses need more time to make their long-term investment decisions – so don’t expect them to raise their capital spending just because May gets a withdrawal agreement.

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The prime minister’s bridge-to-nowhere Brexit doesn’t even properly dodge the devastating no-deal scenario which would wreck our economy. At the moment, “no deal” looks unlikely, but not impossible. MPs and ministers are likely to pull back if they’re staring over the cliff edge just before the Brexit date. For now, “no deal” is most useful as a weaponised threat to help May push her deal through.

But what about after we’ve left the bloc? The current withdrawal ruse is rooted in May’s blind belief that a solution to the Irish border can be found during the transition, and that no prime minister would let Northern Ireland be split off from the rest of the UK. But what if there is no solution in a couple of years? And what if May is not prime minister? A Brextremist leader would have trouble stomaching years more rule-taking stuck in an EU customs union. They might rather crash out, abandoning Northern Ireland and shafting the DUP – who by that point might not be holding the balance of power in Parliament.

Government might not be taking this threat seriously, but businesses would be foolish if they ignored it. That means lots of wasted effort and money stockpiling medicines, food and car parts. That or the more logical option, at least for those companies able to, of shifting operations away from the UK and into the EU’s single market.

Business opinion is hardening. Only today, the UK boss of ThyssenKrupp called May’s  Brexit plan a “complete shambles”. Last week saw the launch of Business for a People’s Vote with business leaders big and small demanding the public get the final say on this Brexit mess. More should join them. A People’s Vote is the best way to end this draining Brexit uncertainty permanently, and that’s good business.

Edited by Quentin Peel