Brexit watch — Vote Leave 2.0

As was predicted by everyone, including probably Jeremy Hunt, the new Prime Minister is Boris Johnson. What was not expected was that, within a few days of entering Number 10, he would have brought the Vote Leave team back together as he put Michael Gove in charge of Brexit planning and appointed political strategist Dominic Cummings as his special adviser.

Mr Gove was of course the face of the Leave campaign, together with Mr Johnson, while Mr Cummings is generally considered to be the policy mastermind behind its most successful slogans including “Take back control” and “£350 million for the NHS”. Both are whole-hearted supporters of the Prime Minister’s plan to leave the EU on 31 October “deal or no deal”, as indeed is the entire new Cabinet. Mr Johnson made it clear to those he invited to join that they could only accept if they were prepared to sign up to that key policy. Although there are still a number of Remainers in his Cabinet, the new Prime Minister has ensured that key posts are held by determined Brexit supporters including Home Secretary (Priti Patel), Business Secretary (Angela Leadsom), Brexit Secretary (Stephen Barclay) and Foreign Secretary (Dominic Raab).

In total harmony?

While emphasising that he intended to step up planning for a no deal outcome, the Prime Minister insisted that the chances of this happening are still “a million to one”. However, within hours of that statement, an article written by Mr Gove appeared in the Sunday Times (and was then published as a Cabinet Office press release) arguing that no deal remains a very real prospect. “With a new Prime Minister, a new Government, and a new clarity of mission, we will exit the EU on 31 October,” he stated. “No ifs. No buts. No more delay. Brexit is happening.” If there is to be a deal, Mr Gove went on, it must include abolishing the idea of the Irish backstop. Presumably aware that the European Commission has continued to warn that this will not be allowed to happen, he emphasised that planning for no deal is now the Government’s number one priority.

Mr Johnson then appeared to both agree and disagree with his Brexit planning supremo. “My assumption is that we can get a deal," he said. “We are aiming for a new deal but of course Michael is absolutely right that it’s the responsibility of any government to prepare for a no deal.” Referring to his million to one comment, he went on, “provided there is sufficient goodwill and common sense on the part of our partners, that is exactly where I would put the odds.” And, while promising to go “the extra thousand miles” to get a deal, he said that he would not talk to EU leaders unless they accepted that the Irish Backstop, indeed the whole Withdrawal Agreement, was dead.

Is a deal possible?

With a wafer thin majority in Parliament and the country still evenly divided between remainers and leavers, Boris Johnson has few cards to play if and when he decides to open negotiations with the EU. He could try to call a general election to give himself a firmer mandate but has categorically ruled out doing so before Brexit (although it might still happen). If he is to have any chance of persuading the EU to drop the idea of the Irish backstop, he must therefore have something credible to put in its place. The alternative arrangements that are repeatedly mentioned all seem to rely on technological solutions that are not ready and cannot possibly be set up before the deadline.

So Mr Johnson faces the same conundrum that was spelled out to his predecessor by Sir Ivan Rogers, the former UK ambassador to the EU. He told Theresa May: “You have said to the Irish that under no circumstances will a hard border be erected. You have said to the Democratic Unionist community that under no circumstances will there be divergence between Northern Ireland and the rest of the UK. And you have said to the right of your party that we must leave the customs union. Well you can have two of those options: you cannot have all three.” Mr Johnson is therefore left hoping that the EU will blink first. He has certainly given EU leaders something to think about by suddenly suggesting that the UK could stay in a customs union with Europe for another two years.

Worrying times

Despite protestations to the contrary, the Prime Minister’s demands are clearly making the possibility of no deal increasingly likely as he continues to insist that the EU must give way on its red lines. Reacting to this possible outcome, the financial markets have sent the pound to its lowest level for two and a half years. In addition, the latest Economist survey of Brexit models shows none that are medium-term positive, except one from a pro-leave group that assumes the totally improbable idea of there being no import tariffs. The UK’s biggest business group, the CBI, is clearly growing more concerned and has now moved from its previous position of arguing against the idea of no deal to one where it is urging its members to prepare for that eventuality.

In a major new report, “What comes next? The business analysis of no deal preparations” (available at www.cbi.org.uk ), it has put forward 200 recommendations to help accelerate no deal preparations. Arguing that neither the UK nor the EU is properly prepared for the complications that will follow a disorderly Brexit, the CBI said that it had decided to publish practical steps that both sides, and businesses, can take to reduce the worst effects. Contrary to many claims, the report suggests that the EU lags behind the UK in its no deal preparations. It also points out that, despite businesses having already spent billions on contingency planning for no deal, they remain hampered by unclear advice, timelines, cost and complexity. In particular, smaller firms are less well prepared.

Similarly, a meeting with Brexit Secretary Stephen Barclay has failed to allay the fears of the Road Haulage Association (RHA) with regard to how its members will be affected in the event that the UK leaves the EU with no deal. The RHA was keen to know how this would impact on the haulage industry. Highlighting that businesses moving goods across borders still do not know what they will be required to do if there is a no-deal Brexit, and amid predictions that there will be huge backlogs at ports, RHA chief executive Richard Burnett has set out a range of measures which he would like to see the Government introduce. These include: providing clear guidance on how the whole end-to-end journey will operate; authorising and opening new and substantial customs facilities for transit; and introducing a consolidated and simplified import safety and security declaration system.

In addition, the RHA is urging Ministers to make lorry holding facilities, such as Operation Brock, fit for purpose. The RHA paper on a no deal Brexit can be found at www.rha.uk.net . It points out that, unless changes are introduced, a lorry with 2000 consignments onboard will require about 165 hours of staff time for extra data entry.

Stockpiling may not be the answer

In the run up to the last major Brexit deadline (29 March 2019), the emphasis was on stockpiling goods to try to overcome possible shortages that would occur if the ports were blocked. However, those firms trying to repeat the exercise in coming weeks face a major problem. The head of the United Kingdom Warehousing Association (UKWA) has warned: “Warehouses in the UK are currently running at almost full capacity, with little prospect of more space becoming available in the short term.” Peter Ward pointed out that those looking for space to stockpile are seeking short-term capacity only, supported by a full suite of logistics services.

“What is needed right now,” he went on, “is fit-for-purpose facilities complete with racking, forklifts, warehouse management technology — and, of course, people — all ready to go on a pay as you play basis. Such operational and fully kitted and serviced space is in desperately short supply.” Before 29 March, a survey of UKWA members revealed that 85% of respondents had received Brexit-related enquiries — mostly for short term requirements — while 75% were ‘full’. UKWA plans a further survey over the coming weeks but, according to Mr Ward, it is unlikely any additional space will have become available — if anything, he expects the position to have worsened. He also highlighted that the October deadline could not have come at a worse time as warehouses were already gearing up for the Christmas season that now includes Black Friday and Cyber Monday. Just to add to an already confused situation, Mr Ward also highlighted staff shortages caused by the number of Eastern Europeans leaving the UK since the 2016 referendum.

Freedom comes at a price

The sign on the Johnson/Gove coach famously said “We send the EU £350 million a week. Let’s fund our NHS instead”. As the two contemplate a Brexit Budget in the Autumn, they will be told that the costs of preparing for Brexit in the UK currently run at £600 million a week — and are set to go higher.