I don’t normally write about politics, being just a VC with interests and/or experience of over 50 UK businesses over a long career. But an old article about threats from John Redwood to business people in the Telegraph resurfaced on Twitter last week and having only just read it for the first time it has motivated me to speak up*. The headline and subhead express his view: “Businesses that speak out for Britain’s EU membership will be punished, vows John Redwood” and “Leading Tory Eurosceptic says companies who publicly back staying in the EU will pay very dear economic and financial price, with executives potentially losing their jobs”.
I’ve calmed down since I first read the article so the following is written with a rational head.
Firstly, this sort of bullying is totally unacceptable. But it is going on everywhere. Anyone who dares to suggest that leaving the EU is a bad idea or that we should consider having a second referendum on the final deal risks being pilloried. Most business people keep their heads down concentrating on their issues today. Few dare to air their beliefs that Brexit is bad for business and the economy. Few state publicly that it should be put to another vote to check the will of the people is to proceed with the Brexit deal once terms are agreed. I’m willing to stick my neck out and here’s why.
There is a very real prospect that we may leave the EU with no deal and that would affect businesses big and small a great amount. In macro terms virtually all economists agree that any form of Brexit will slow down our economy’s growth and some forms of Brexit are a lot worse than others.
Part of the challenge of Brexit is that it is so incredibly complicated that almost all voters are turned off by the detail. A canny politician can easily use fake news, bluster and even outright lies to obfuscate and confuse. As a result even more voters get turned off by the arguments, and I think tend to stop listening – most sticking to the view they always had about this subject.
This diagram from brexitoptions.co.uk is incredibly helpful:
The little UK flag shows where we sit now and on the brexitoptions website you can see where we sit under each potential form of Brexit. They cite five different potential outcomes for Brexit and the UK government is currently aiming for what is likely to be the fourth worst for business (Free Trade Agreement) and may end up in the worst place for business and our economy (WTO rules).
The terrible thing about both those options though is that it seems very very unlikely they can be delivered without creating a hard border between Ireland and Northern Ireland. After 20 years of the Good Friday Agreement – the peace agreement which ended nearly 30 years of sectarian violence – it would be disaster if Brexit sent us back to the 70s to 90s in terms of bombings in Northern Ireland and on the mainland too. Many people died and were injured, and the whole country was affected, with Northern Ireland chronically so:
Surely, surely the ultra Brexiteers don’t think it is worth paying that price for their form of Brexit?
One of the main purposes of the EU of course is to promote peace throughout Europe – hardly anyone mentioned that during the referendum. There are great benefits of trading and working together in the single market and customs union such that we get to know each other, and our businesses and families become intertwined so future war becomes much less likely.
Back to business, the FT graph above shows the macro effect – as a country we could be 8% or so worse off. Another very important point that has scarcely been mentioned is the micro effects of the FTA or WTO forms of Brexit. I think Theresa May is aware of this because of her recent quotes that after Brexit our economy is going to be “different”. Boris talks of the Brexit dividend which almost all economists agree is a fiction. May refused recently to talk of such a dividend and repeated her view that things will be different.
I believe this is hinting at an uncomfortable truth that there will be plenty of losers – and I admit there may well be some winners (I have never understood why some rich folks like Arron Banks, John Redwood etc are so keen on Brexit – maybe they honestly believe they will be financially better off as well as “free” from Europe with their beloved sovereignty).
The challenge is that we don’t really know yet who the losers will be, partly because we still don’t know what form of Brexit there will be. It may well be farmers – I always thought it was surprising that the majority of farmers voted to leave given how much they depend on payments from the EU’s Common Agricultural Policy:
It seems very likely to me that the motor industry will be badly affected and many jobs lost because they rely on just in time supply chains which will no longer be able to be “just in time” if we are not in the single market and customs union.
And in the tech industry, I am very concerned that our prospects are worse because a) less entrepreneurs will come to the UK to start businesses and b) it will be harder to attract the best employees to join early stage companies here. Sure we’ll survive and hopefully we will still create or be a key part of the growth of some companies to follow the success of the likes of Spotify and Transferwise, but the flow of these will be slower because of Brexit and that seems a big shame to me.
So in spite of the rhetoric of the ultras like Redwood, the Telegraph and their like, I hope that common sense will eventually prevail in the House of Commons. It seems to me that for purposes of longevity, Theresa May keeps kicking the can down the road, avoiding conflict within the Tory party and trying to avoid having to move away from the current position which I believe is untenable especially because of the Irish Border. If common sense does prevail we will end up with a last minute climbdown or capitulation and remain in the customs union and/or a form of the single market such as with the EEA which includes Norway as a prime example.
BUT if that is right, then what an incredible shame that will be. A fudge like that means the government can claim we did Brexit i.e. followed the “will of the people” in June 2016, but it could well be BRINO – Brexit in Name Only where we will be adhering to all the rules and convergence with the EU on trade and have no seat at the table to influence the EU’s regulations or direction of travel. We will be rule takers and a vassal state as Jacob Rees Mogg calls it.
We will still be paying the EU €50bn or more over the next generation or two and we will still have an economy 2% to 4% smaller than it could have been, which means we will have many £ billions less to spend on the NHS and other priorities.
So Mr Redwood, don’t lecture business people on what we can and can’t say. It is overwhelming likely that Brexit is a bad deal for business and therefore a bad deal for Britain. The Tory government is doing a terrible job of negotiating Brexit and doesn’t have a clear united view itself of which of the five forms of Brexit it wants to deliver.
Like an increasing large number of people now, I want to see what deal the UK government agrees with the EU, and then have a referendum for the voters to choose whether we accept that deal, or stay in the EU completely, or crash out to no deal WTO rules. Westminster can’t decide what it wants so let the will of the people decide. New information might of course mean that the people’s will brings a different outcome and that is what bullies like Redwood and the Telegraph are nervous of. Bring it on!
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* if you don’t have a subscription to the Telegraph, then here is the full text of the article, while I’m able to share it. Given how awful this is I think as many people as possible need to see it in full rather than just see the headline and subhead.