macroafricaintel | [#StopTheKillings] UK-Africa post-brexit trade scenarios (1)

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

The second week of July started with the resignation of ertswhile UK Brexit secretary David Davis. The junior Brexit minister Steve Baker also called it quits. Their resignations came just days after a tumultous Friday cabinet retreat in early July at Chequers, the British prime minister’s official country home, to harmonise the positon of the government on Brexit. Not long afterwards, foreign secretary Boris Johnson also chose to leave the May government. But all seemed well after the retreat. And prime minister Theresa May was hailed for what was considered a hard-won victory; especially for a PM who despite her many failings seemed to continue to beat the odds. So, what changed? With well-known sharp divisions within the cabinet, the beaming smiles by the ministers for the cameras did seem unnatural actually. It was revealed even then, though, that seven of the twenty-seven ministers at the retreat did oppose Mrs May’s plan; which would allow for free trade between the UK and the EU but not allow free movement of people or subject the United Kingdom to the European Union’s judicial system. In any case, schemes are believed to be afoot to finally edge Mrs May out of Number 10; the prime minister’s office and residence.

Costs of turbulence
More importantly, the resignations undermine the British prime minister’s negotiating position with the European Union, officials of which must surely relish the disarray in London. And as the ongoing drama in the May government has been in the full glare of the public, the Europeans would expectedly become increasingly emboldened. They would be irrational otherwise. After all, they have thus far managed to push the Brits towards a softer and softer Brexit. That is, one where the UK’s exit is more ceremonial than actual. Donald Tusk, president of the European Council now even talks of a no-Brexit scenario. In a tweet after the resignation of Mr Johnson, he remarked thus: “Politicians come and go but the problems they created for people remain. I can only regret that the idea of Brexit has not left with Davis and Johnson. But…who knows?” Imagine that? Incidentally, it is Mrs May’s softer Brexit stance that instigated the recent resignations. In the aftermath, she said her government would prepare for a range of Brexit outcomes including the scenario that she might not be able to secure a deal with the European Union.

By itself an expensive venture, the costs of Brexit have certainly been compounded by the turbulence of the May government. And it is clearly not all too certain she would be in power long enough to conclude negotiations with the European Union. With the position of her potential replacement, opposition Labour leader Jeromy Corbyn, not all too clear either, the consequent uncertainty is proving to be expensive for the British economy by the day; as firms make contingency plans. UK manufacturers and retailers are palpably and understandably concerned, with their chief executives becoming increasingly vocal about their frustrations. The turmoil at Number 10 is also reverbrating through the cobbled streets of the Bank of England, the UK central bank. Already on a tightening drift, there might be some hesitation by its monetary policy committee members to rock the boat if the prospect of a leadership change on Downing Street remains. The central bankers hardly want to compound what are already mounting Brexit costs for the economy by an expected rate hike in August and later, that could instead of stemming rising inflation stifle growth more. In a parliamentary hearing in about mid-July, central bank governor Mark Carney was unequivocal about one Brexit scenario at least: “…in the event of a no-deal scenario…there would be big economic consequences.” In any case, the governor long signalled the Bank of England would do the needful on Brexit “whatever form it takes”.

An edited version was published by African Business magazine in August 2018. Final part of article planned for next week’s column.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz.

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