IPM hears Brexit views from Lord Mandelson and Sir Andrew Cahn

Lord Mandelson and Manchester Metropolitan University welcomed Sir Andrew Cahn (former head UKTI).  Cahn demonstrated a measured and knowledgeable understanding of the vital role the UK has played in forging modern Europe, before outlining the country’s prospects after March 2019.   The event was organised by McrMetropolis, MMU’s policy unit, of which IPM is a core member.

For those labouring under the impression that a reinvigorated Britain will cut a swashbuckling journey to global trade domination, please look away now.  Equally, for those harbouring a remote hope for a second referendum, you will be disappointed to learn of Cahn’s resolute assertion that Brexit will happen and there will not be a second referendum.

 

Deal or no deal

 

Ultimately, Britain’s future rests on the outcome of the deal.  There will be a deal.  There simply has to be, because no deal is not an option.  Without a deal, Cahn’s warns the subsequent business and market reaction could bring down the government.  The government know this, but so does the EU.   Therefore, a deal will happen.

Unfortunately, the cards are stacked against the UK. As UK negotiators are quickly learning, achieving concessions from the EU is proving difficult. If the outcomes of the first rounds of negotiations are anything to go by, the EU is in driving seat, and the UK’s objectives still remain unclear.

Cahn dismissed the idea that Europe is out to punish the UK, as paranoia.  Rather, the EU will simply drive a hard bargain and dictate the terms to achieve what it wants from Brexit.  Politically, Germany has little to gain by offering support to the UK, whilst France would simply like to capture London’s financial services.  Britain might be able to claim some victories.  Improved fishing rights may help certain communities, although Cahn reminds us this sector contributes less 0.07% of the UK’s GDP (mseproject). European Citizens’ Rights and Northern Ireland are much bigger issues, that are likely to undermine any prospect of Britain achieving the Brexiteer's vision of a free unregulated state.   

In Cahn’s view, any deal struck before March 2019 will be unstable.  In all likelihood, no matter who is Prime Minister, the UK is likely to be back at the negotiating table within 5 years.

 

Taking back control?

 

The irony, despite never fully embracing the European project, the UK had been an effective and admired negotiator within the EU, skilfully achieving concessions and amendments which suited both itself, and many other member states.  However, this position of power has been fatally undermined by the referendum result.

However, Cahn suggest the UK has over-estimated its influence within the EU, clinging on to the notion that it is a nation capable of punching above its weight on the world stage.  If Brexit achieves one thing, it might be a reality check for the British, perhaps providing an opportunity to cast off the legacies of Empire and confront its ambivalent relationship with Europe.

The economic impact according to Cahn, however, is going to more serious than people think.  The geopolitical reality is that there are three significant global trading blocks: the USA, China, and Europe.  Global businesses are looking to enter and expand in these markets.  So why would an inward investor choose the UK to expand or locate their business if the country sits outside of these key markets?

Sector responses already provide some early signals on the direction of travel.  Hospitality, as our members tell us, is already haemorrhaging staff, with implications for the UK’s leisure and tourism industry. The same appears to be happening in agriculture.  Some might argue the UK can afford to lose these mainly low-wage migrant workers, but the same cannot be said about key workers in health, finance and education. Prospects for manufacturing also remain bleak, and it will be interesting to monitor the future investment plans by say, the major car producers.  The regional impacts are likely to be highly uneven.  Major cities are likely to ride out the storm, but marginal places and countryside are likely to experience vastly reduced growth prospects.   If Northern Ireland achieves special status, effectively to become part of a Customs Union, then why not the same for Scotland, London or even the Northern Powerhouse?   

Cahn’s final prediction is that the UK will most likely return to the EU with Associate member status, as a country that took back control, but gave away its power.

Dr Steve Millington