Will Boris Johnson’s bluster over a no-deal Brexit collide with reality?
Boris Johnson fears a grisly political fate awaits him if he becomes Britain’s prime minister and breaks his promise to take the country out of the EU on October 31. Asked this week if Conservative activists would cut up their membership cards in protest, he joked: “They will cut me up, I expect.”
Mr Johnson wants a new exit deal with the EU. But if none is forthcoming he has vowed to sever Britain’s 46 years of ties with its biggest trading partner overnight — the “clean break” cherished by some Eurosceptics. “We will be ready by October 31,” Mr Johnson has said. “And it’s vital that our partners see that.”
The clear frontrunner in the race to be Conservative leader — and on this occasion the next UK prime minister — Mr Johnson claims the EU will at the last minute swerve to avoid a “no-deal” Brexit and offer him better withdrawal terms. The prospects of no deal are, he claims, “a million to one”. But such brinkmanship is adding to the already immense pressures on him, should he enter 10 Downing Street on July 24, to finally settle the Brexit question.
Steve Barclay, the Brexit secretary responsible for preparing the country for an abrupt departure on October 31 — and a Johnson loyalist — says he believes the government is well prepared for all eventualities, but warns: “A no-deal outcome is underpriced by everyone.”
It is perhaps one of the few points of agreement between Mr Barclay and Ivan Rogers, Britain’s former ambassador to the EU, who warns in his book 9 Lessons in Brexit that a no-deal outcome is both possible and likely to lead to “disruption on a scale and of a length that no one has experienced in the developed world in the last couple of generations”.
Sir Ivan adds that markets have until now treated the possibility of a no-deal exit as “virtually unimaginable” but that the prospect — far from being “a million to one” — has been “seriously underpriced for a year or more”. The former diplomat is pessimistic: “We are dealing with a political generation which has no serious experience of bad times and is frankly cavalier about precipitating events they cannot then control, but feel they might exploit.”
Mr Johnson, whose rival Jeremy Hunt is also prepared to countenance no deal, knows his audience. A recent YouGov poll showed that 54 per cent of Tory members would be willing for the Conservative party itself to be destroyed if that was the price for leaving the EU. Some 63 per cent said they would accept Scotland leaving the UK if it meant the delivery of Brexit.
Tory Eurosceptics now look to Mr Johnson to deliver on the 52:48 Leave vote in the 2016 referendum — whatever the impact on the British economy. “I think people are yearning for this great incubus to be pitchforked off the back of British politics,” Mr Johnson said in typically flamboyant language.
What once seemed unthinkable is now being presented as plausible or even highly likely. The question for business, the markets, the British public and the UK’s trading partners is no longer whether a no-deal exit is a possibility, but whether it can be avoided.
The Eurosceptic right has been on a journey of discovery in recent years which has ended up with many Tories feeling phlegmatic about a no-deal exit or even embracing the idea.
There are plenty of quotes from Mr Johnson and other Eurosceptics advocating the idea of Britain maintaining close, Norway-style trading links with the EU’s single market after Brexit. But when Theresa May, as prime minister, tried to negotiate close regulatory ties with the EU, some of those same Tory Eurosceptics read the small print and concluded that it amounted to “vassalage”.
Severing economic bonds with the EU overnight could mean tariffs, customs and regulatory checks, disruption to supply chains and data flows, the loss of trade deals with third countries negotiated by Brussels and a host of other problems. Philip Hammond, chancellor, said it would cost the exchequer £90bn a year and hit “the prosperity of millions of our fellow citizens”.
A leaked memo prepared by Mr Barclay in May suggested it would take six to eight months of engagement with the pharmaceutical industry — well beyond the Halloween deadline — “to ensure adequate arrangements are in place to build stockpiles of medicines by October 31”. It estimated four to five months alone would be needed to prepare traders for new red tape at the border.
But many of the Conservative members and MPs to whom Mr Johnson could soon owe his job believe the warnings of chaos are overdone and expect the new prime minister to deliver Brexit on time. Earlier this year a study led by Tim Bale of Queen Mary University of London found that 76 per cent of Tory members thought warnings about a no-deal exit were “exaggerated or invented”. Mr Johnson seems to agree, telling a televised leadership debate on Tuesday that the costs of no deal would be “vanishingly inexpensive if you prepare”.
No deal is not Mr Johnson’s preferred outcome. Leaving aside the question of whether the British parliament would allow him to commit what many MPs believe to be an act of monumental national self-harm, the prospective prime minister has not waited most of his life to take power only to inherit an economic and political crisis.
His allies insist he has a plan to remodel Mrs May’s exit deal — already rejected three times by parliament — to allow him to secure an orderly withdrawal. “It’s all sorted,” jokes one former minister close to Mr Johnson.
Yet the EU has already made it clear that it will not reopen the 585-page withdrawal treaty it agreed with Mrs May last November. The document includes a £39bn “divorce bill”, plans for an implementation period, guarantees for citizens’ rights and the backstop plan to avoid a hard border in Ireland.
The contours are emerging of what Mr Johnson would seek in a whirlwind mini-negotiation over the summer and early autumn, effectively tweaking Mrs May’s deal without ripping it up.
Allies of the former foreign secretary and officials in Brussels say he will seek an exit mechanism from the backstop — which provides for a “temporary” UK-EU customs union — in case trade talks break down.
Mrs May tried and failed to secure such a mechanism. Mr Johnson insisted at his campaign launch that “with a new mandate, a new optimism, a new determination” he could secure an amended deal by October 31.
Johnson supporters say a target date for the completion of a UK-EU trade deal could be written into the non-binding political declaration, along with reassurances to Tory Eurosceptics that Britain was seeking a loose, Canada-style trade deal that would leave Britain with considerable regulatory freedom, rather than a Norwegian version.
While Brussels is open to changes to the political declaration, a new British prime minister could run into the same brick wall as Mrs May when it comes to changing the backstop, and therefore the withdrawal treaty.
Some in Mr Johnson’s team believe Conservative MPs and some Labour MPs — exhausted by Brexit and facing a threat to their seats from Nigel Farage’s Brexit party on one side and the pro-EU Liberal Democrats on the other — might just back a revamped deal. In June, eight Labour MPs voted with the government against a motion intended to stop a new Tory prime minister carrying out a no-deal exit, and 13 more abstained.
“We could say to them, ‘Yes, it looks a bit like Theresa May’s deal, but you can spend the next two years shaping the terms of a trade deal’,” says another former minister close to Mr Johnson.
Under this scenario, the presumptive prime minister could deliver a Brexit deal before October 31, spend a year or so cutting taxes and raising public spending — pumping up borrowing — and then go to voters promising a bright post-Brexit future in a general election.
But what happens if it goes wrong? What if Brussels refuses to give Mr Johnson what he needs to get a revised deal through parliament and past Tory Eurosceptics? Mr Johnson might then have little choice other than to see through his threatened no-deal Brexit.
He has promised to ramp up government preparations for no deal to keep up the pressure on Brussels. Home secretary Sajid Javid, tipped to be chancellor in a Johnson administration, has promised an “emergency Budget” to give the economy a shot of adrenalin ahead of any possible shock.
Mr Barclay insists that “no deal won’t be Armageddon”, saying most of the legislation is in place while potential bottlenecks around the Dover to Calais trade routes have been addressed. But he acknowledges that it is hard to predict how Brussels will react to a looming no-deal exit. Eurosceptics cling to the belief that the EU will do what is necessary to protect itself. “Forty per cent of Europe’s data centres are in the UK — are they going to cut off access to that?” Mr Barclay asks. “Its sovereign debt is held in London — would they want to cut off access to that?”
He admits that many small businesses, which struggled to prepare for a no-deal exit on the previous March 29 deadline, are still not ready. “Businesses are confused about no deal,” he says. “The government is saying it could happen but parliament says it won’t. We need to be much clearer that this is a real possibility.”
Mr Barclay’s optimism is not shared by many in business or parts of the civil service, which is creaking under the strain of Brexit preparations and where there is growing concern about whether the UK government and business could cope if a new Conservative prime minister followed through on the threat to tumble out on October 31.
In practical terms stockpiling goods in warehouses was just about manageable in March but it will be much more difficult in the autumn, when companies are already building up for the Christmas shopping season, Black Friday sales and potential weather disruption.
According to Savills, the property agency, the estimated vacancy rate for warehouses of more than 100,000 square feet nationwide in the second quarter of the year is 6.8 per cent. In the “inner M25” Greater London area the vacancy rate has fallen to just 2.2 per cent. Mike Coupe, chief executive of Sainsbury’s, says the October 31 deadline is “not far off the worst day possible” for retailers.
Joe Owen, programme director at the Institute for Government, says officials will be under huge pressure: “Some are still working at breakneck pace. Injecting urgency and energy into no deal again is far from straightforward.”
With both Brussels and Westminster soon to close down for summer, pro-Europeans are worried that if Mr Johnson became premier he could be pressurised into pursuing no deal by Tory Eurosceptics, rather than seeking extra time for further talks. One cabinet minister, an opponent of Mr Johnson, says: “The question of who controls access to him will be really important.”
The fear among pro-European Conservatives is that Mr Johnson will be captured by hardline members of the European Research Group, whose members have been heard to mutter that there will be “a horse’s head in his bed if he betrays us”.
Mainstream Tories in Mr Johnson’s senior team, including health secretary Matt Hancock and Cabinet Office minister Oliver Dowden, will be pulling in the other direction.
Mr Hammond and others have threatened to use whatever parliamentary devices are available — including bringing down a Tory government in a vote of confidence — to stop no deal. Members of the “Gaukward squad” — named after justice secretary David Gauke — claim that up to 30 Tories are meeting regularly to plan the resistance.
But if prime minister Johnson was cornered — his prospects of a deal in Brussels blocked, no deal scuppered in parliament — then a general election might be his only option. Such an outcome would not be without its dangers. Mr Hunt has described it as “political suicide” and for Mr Johnson, who has a majority of 5,034 in his Uxbridge seat in west London, it might mark an abrupt end to his political career. “Boris’s instinct will be to try to stay as prime minister,” says one cabinet minister.
But the prospective prime minister is engaged in perhaps the most dangerous game of bluff ever seen in British politics. Referring to his no-deal threat, Mr Johnson said this week: “They have to look deep into our eyes and think: ‘My God, these Brits actually are going to leave.’” Conservative Eurosceptics will show little mercy if it is the new British prime minister who blinks first.