Brexit. What now?

Brexit
Matteo Acquarone
30 Jul 2019
Matteo Acquarone graduated in Industrial Engineering with a specialization in logistics at the Polytechnic of the city of London, where he has lived for many years. There he took part in important infrastructural and technological projects in the field of transportation and services with multinational corporations. He has also collaborated with the most known management consulting firms worldwide, diversifying his activities in management and IT.

R. Boris Johnson, revealing himself the Brexit’s standard bearer, is the new British premier in a political context characterized, however, by great instability. Does leaving the EU mean blood and tears?

MA. There is a clear perception that the European Community costs a lot and that bureaucracy and invasive rules restrict the well-being and freedoms of Europeans. But the last conservative governments had cut services and benefits for the weaker classes by blaming the EEC for the economic difficulties. The success of Boris Johnson and Nigel Farage is the result of this, a shouted politics, also based on made-up data, and on the widespread nostalgia of a great England. Data from the Brexit referendum say that people over 40 voted in favour of leaving, especially in rural areas and low-income industrial centres. In London, however, the majority chose to “remain”. Johnson, just become Prime Minister, hypothesizes a “hard” leave, without negotiation. In theory, the return to the trading rules of the World Trade Organization. It could be a risk of a severe recession in the UK.

Illusions hard to die

R. With a referendum with an almost equal result, twists and turns, the exhausting negotiation of May’s government, the revival on several occasions of the idea of a second referendum, the reading of English political news has been difficult in the last three years. Could you give me any guidelines?

MA. Already with Margaret Thatcher there was strong resistance to the idea of integration. It is no coincidence that we are talking about the only European country that has kept its currency in the Union. Transversal to bipartistism, it resisted the vision of a great England, as in his Victorian past. This, despite a very different reality. A very simple example is given by the recent case of the British oil tanker in the Persian Gulf. England does not have the military forces to decisively stand up to Iran, and this awareness is shared by the most influential opinions. Nevertheless, it is supported an idea of power that will find new greatness also in the restoration of Commonwealth relations.

The automotive industry

R.  Well, from this point of view, Brexit is an escape from reason. And, so, what kind of link is there between the remarks of Johnson and Farage and the interests of the groups that dominate the British economic scene?

MA.  Let’s take a look at the automotive industry. There is no longer a British world player and large companies are multinational groups.  In the recent past, England has been a conquering land for the world’s greatest brands. A good level of engineering knowledge, lower taxes and European funds have facilitated the settlement of production facilities in the depressed areas of the country by German, Indian, Japanese and American companies. In a sector where the game is played on minimal differences of value compared to competitors, it will no longer be economical to produce cars in England. Indeed, the leading automotive companies have already started to resize, relocate and close plants. The employment of at least 350,000 workers, between production and related industries, is at risk.

The irish danger

R. Matteo, tell me about the Irish border issue. The impression is that we do not fully understand the importance.

MA.  A matter of extreme importance, and perhaps we do not yet have the real perception of the dangers caused by the Brexit. Both Northern Ireland (Ulster), one of the four founding nations of the United Kingdom, and the Republic of Ireland (Eire) have flourished in the European dimension. The closure of the border for the former, which has a weak economic structure, could be dramatic.

R. Are we going towards a new conflict?

MA. We are talking about a country marked by a civil war, between Catholics and Protestants, which marked the 20th century. In the new anti-European context, the economic difficulties, the denied access to European funds and the closing of borders could revitalise the old contrasts. Notice that, moreover, the internal equilibrium of the Conservative Party in government is taken hostage by the Northern Ireland vote.

R. Precarious political balances that, among other things, have weakened the two major parties and have strengthened beyond any forecasts new players such as the Liberal Democrats. What do you expect: short-term elections, second referendum or…?

MA. Three ministers have resigned in recent days, and a dozen Conservative Party MPs have Johnson’s future in their pocket. We could see a lot of twists and turns. In the Prime Minister’s eyes you can see the temptation to go immediately to the vote, to try to change the equilibrium and eliminate internal dissent.

Political convenience and real risks

R. The real aim?

MA. Today the Tories think to the opportunity to create a tax-exempt area, free tax areas in the ports, opacity over transactions, in order to attract capitals and investments, trying to take Singapore and Switzerland as a model. The European financial system, however, seems to choose “leave” relocating to Northern Europe. London is no longer synonymous with financial soundness, and current uncertainties push companies of any kind to leave. And the housing market is already experiencing instability in the short and medium term.

A. The… big question, beyond your possible predicting abilities. How will it end?

MA. Britain will find itself completely unprepared and isolated in trading, transport and services from the European market. For this reason, the negotiating attempts of the May’s government for a soft Brexit”. Simulations presented by various trade associations assume blocked ports, airports, customs and the rise of duties to impede exports, with a domino effect on the economy. The recession is a real risk.

 

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