Hallam: where’s the reward in a no-deal Brexit?

With 80 days until Brexit, Nicholas Hallam, CEO of Accordance VAT, questions whether politicians have any understanding of the needs of business and the high risk stakes of a no-deal Brexit      

For David Davis, it is all so simple. Writing in the Telegraph last week, the former Brexit secretary – undaunted by his experiences as a minister – was once again dispensing certitudes.

According to Davis, the UK parliament should vote down prime minister, Theresa May’s Withdrawal Agreement on 15 January and concentrate instead on a no-deal Brexit.

This, Davis believes, is the way the EU will be driven to the negotiating table. ‘This is the moment to be hard-nosed about these issues. The more we prepare to leave the EU without a deal, the more likely a good deal becomes,’ he wrote.

Davis has always been of the view that what he sees as the economic imperatives of individual EU member states will in the end overwhelm the European Commission’s desire to protect the integrity of the single market.

Back in May 2016, he was sure that German car manufacturers would quickly force a Brexit deal: ‘The first calling point of the UK's negotiator immediately after Brexit will not be Brussels, it will be Berlin, to strike a deal’, he tweeted.

Experience has not dented his confidence. In his recent article he variously asserts that the UK is largely prepared for a no-deal Brexit; that there is no need for a hard-border in Ireland; that the customs check issue is easily solved through existing technologies and processes; that an acceptable ‘Canada +++’ deal has already been offered by the EU; and that ‘the EU would push and push until finally we reach a resolution at the eleventh hour’.

In short, for Davis, the UK has nothing to worry about and should drive the hardest bargain it can. Even if there were to be no-deal, various other agreements and structures (for example, the WTO and Common Transit Convention) would kick in, ensuring a soft landing.

At no point in the piece does the former minister acknowledge any risk at all to the UK in pursuing a no-deal strategy. Not even the reputational consequences of reneging on financial commitments to the EU (and the potential implications for future trade deals), which it requires no expertise to imagine, are considered.

Let alone the effects of potential legal uncertainty on, for instance: customs procedures; VAT; pharmaceuticals; road haulage; air freight; crime prevention; university admissions; NHS staffing, and so on and on.

Every single one of Davis’s contentions has been repeatedly attacked by numerous specialists in the relevant fields over the last two years, yet he still presents his assertions as self-evident truths.

In his forthcoming book Vices of the Mind, philosopher Quassim Cassam, professor of philosophy at the University of Warwick, considers the style of belief of populist politicians, arguing that they characteristically display ‘epistemological insouciance’: a blitheness not only about particular facts, but about the existence of fact per se.

Davis fits this wobbly mould. Sunk deep in ideological conviction, he feels no obligation to even recognise the preponderance of evidence against him. The problem is not that Davis is definitely wrong (we cannot know yet), but that he is incapable of acknowledging the existence of that which shows he could be wrong. This is not only Europe, but reality, à la carte.  

Granular, multi-stakeholder influences

Large scale contemporary businesses are not run like this. No one can imagine Tim Cook, CEO of Apple, or Jeff Bezos, Amazon’s CEO, gambling their companies’ futures on untested optimistic hypotheses about the behaviour of competitor organisations.

On the contrary, in much of corporate life, the agony is all in the protracted, granular, multi-stakeholder push and pull of comprehensive assessment: slow death by SWOT (strengths, weaknesses, opportunities, and threats).

But great companies find a way to reconcile the entrepreneurial urge with the need to preserve: risk taking is central to these enterprises, but the risks are calculated, hedged and re-hedged.  

Sir Ivan Rogers, formerly the UK’s ambassador to the EU, believes that UK corporates have seriously underestimated the likelihood of a no-deal Brexit. One reason may be that the kind of thinking exemplified by Davis is so alien to them as to be inconceivable. Who would take a chance like this? With a whole country?

Complacency of Whitehall

Poignantly, as it now turns out, a furious dissatisfaction with the nature and quality of the UK’s political planning and decision making was a primary motivation for the campaign director of Vote Leave, Dominic Cummings.

Cummings (played by Benedict Cumberbatch in Uncivil War, the Channel Four docudrama about Brexit airing this week) has spent much of his career attacking what he sees as the idleness and complacency of Whitehall.

He believes that serious failures of governance are inevitable in bureaucracies that default to status-quo interest group protection; cannot develop long term strategy; and that do not gather and respond methodically to detailed feedback.

For Cummings, a former special adviser and chief of staff to Michael Gove from 2007 to 2014, Brussels has been even worse than Whitehall, its dismissive inertia certain to incubate dangerous crises of political legitimacy.

Brexit was, for him, a chance for the UK to reset the whole style of governmental administration, taking as a model the best in contemporary corporate procedure together with the hyper-effective management practices that he believes led to the IT revolution at US state agencies during the space race of the 1960s and 1970s.       

Cummings has no time for Davis. Nevertheless, Cummings has never seemed to quite grasp the paradox that the Brexit he demanded could only be delivered by the ‘incompetent’ establishment his Brexit was intended to abolish.

Vote Leave decided for tactical reasons not to campaign for a particular type of Brexit end-state (Cummings realised early that the warring clans of Brexiteers would never agree on a desirable deal).

This had led to the current Cheshire Cat Brexit, where ‘honouring the referendum result’ means whatever you want it to mean, a situation that entitles everybody to be intransigently opposed to any outcome that does not coincide with their own hopes and fantasies.

Thus, Labour leader Jeremy Corbyn can demand a deal in which the UK forms a customs union with the EU, but is not subject to rules about state aid; and the European Research Group (ERG) can castigate the Irish government for its concern about a supposedly ‘phantom’ border problem.

Both Corbyn and the ERG are playing for what they see as the maximum stake: Corbyn’s Labour wants the right to entirely re-model the economy, with massive increases in state intervention and business taxation (well beyond anything currently seen in the EU, and therefore of a type that has historically led to stagnation followed by collapse); the ‘free-trade’ Brexiteers envisage a future with a drastically diminished state and minimal corporate tax (in a version of Singapore that has no meaningful public support, and is viewed with suspicion by many global companies).

In the nature of the case, both sets of wishes cannot be simultaneously fulfilled, but this is not stopping believers pushing for their vision alone, right to the edge of no deal.

If those UK companies trading cross-border into the EU have not come to terms with this yet, they better do now. The clock is running down; a no-deal crash-out really could happen.

When Boris Johnson replied ‘**** business’ to Rudolf Huygelen, the Belgian ambassador’s question about the impact of a no-deal Brexit on commerce last year, it seems to be one promise he was actually determined to keep.  

About the author

Nicholas Hallam is CEO of Accordance VAT

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