Brexit

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The example of how a crankshaft for a new Mini is made shows how car parts can cross the English Channel multiple times during the manufacturing process. Tariffs on these partial exports and imports, and delays to “just-in-time” production processes would make British factories much less appealing to carmakers.

 What a no-deal Brexit could mean for the UK in five charts | Politics | The Guardian

Guardian analysis showed that under WTO rules, British exports to the EU would be hit by tariffs of £6bn (roughly two-thirds of Britain’s net contributions). Imports were also likely to be affected, increasing the cost of living in the UK; and that is without taking into account recent falls in the value of the pound sterling.

 What a no-deal Brexit could mean for the UK in five charts | Politics | The Guardian

Ireland's economy would be among the worst-hit victims if the UK crashes out of the European Union without a deal, according to Oxford Economics.  The Irish economy, which is heavily tied to that of the UK, could lose 2% to 2.5% in the long term because of Brexit, due to the losses in trade.

 A 'no-deal' Brexit would hammer the Irish economy and wipe billions from its GDP | Markets Insider

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A Brexit preparation document leaked to the Sunday Times (paywall) reveals a government bracing for the worst. The leak comes as prime minister Boris Johnson doubles down on his vow to leave the European Union on Oct. 31 with or without a deal. The document, which appears to have been written just this month by the Cabinet Office and marked “official-sensitive,” lists key planning assumptions and details the likely repercussions of a no-deal Brexit. Among them: fuel, food, and medicine shortages, rising costs of social care, significant port disruptions, and a hard border with Ireland. “This is not Project Fear—this is the most realistic assessment of what the public face with no deal. These are likely, basic, reasonable scenarios—not the worst case,” a senior government source told the Sunday Times. The report is one of the first times that the government has shown that it assumes a no-deal Brexit. And, worryingly, the document states that both the public and businesses are unprepared for a no-deal scenario, in part because of “EU Exit fatigue” following the extension of the divorce date from March to Oct. 31. Here are some of the ways they anticipate a hard Brexit will affect British industries and people.

 Brexit document leak shows the UK anticipates the worst — Quartz

Fresh doubts have been cast over Boris Johnson’s commitment to securing a Brexit deal after the government said it would not delay the UK’s departure from the EU even to give parliament time to approve a new agreement. Mr Johnson’s chief Brexit negotiator, David Frost, ruled out a so-called “technical extension” during talks in Brussels this week, according to a leaked diplomatic memo seen by The Independent. It raises the prospect that parliament could run out of time to ratify a Brexit deal even if the prime minister manages to secure a new agreement with Brussels.

 Brexit: Fresh doubts over Boris Johnson’s commitment to deal after extension ruled out | The Independent

The reports today that Dominic Cummings, Boris Johnson‘s top aide, described Brexit talks as “a sham” in a strategy meeting have shed a new light on Brexit talks – and whether the government is telling the truth about its strategy. The prime minister says the governments wants a deal, but appears to be making no real effort to get one.  Downing Street denies the leaks – but they certainly tally with what we’re hearing in Brussels.

 Has Boris Johnson misled voters over ‘sham’ Brexit talks? | The Independent

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The Centre for European Reform, the Bank of England and others have estimated that by late 2018 the economy had already suffered lost growth of over 2 per cent compared to how it would have performed. Given the further slowdown in the economy since, the figure now is likely to be nearer 3 per cent. In other words we would have been some 3 per cent richer as a nation, more innovative and more competitive. Why? Because the main hit has indeed been to investment, which is essential for innovation and growth. 

Although we have record low unemployment, this is largely because firms have done the cautious, prudent thing. In the middle of the huge economic and political uncertainty that the planned departure from the EU has created, they have adopted the strategy of meeting whatever demand there is by hiring more workers, who are relatively cheap (and can be fired if need be), instead of investing as they otherwise would have done in plants, machinery, operations and systems.

 Want to see the economic damage already done by Brexit? Look to lost business investment | Prospect Magazine

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The plot thickens..

Earlier on Saturday, Philip Hammond, the former chancellor, suggested Johnson was pursuing the interests of financial backers set to gain from a no-deal Brexit, in a major escalation of tensions in the prime minister’s own party. Hammond said he was repeating a comment made last week by Rachel Johnson, the prime minister’s sister. The former chancellor was accused by senior Tories of attempting a “smear” without evidence. However, Hammond was supported on Saturday by a series of MPs from across the Commons. “Johnson is backed by speculators who have bet billions on a hard Brexit – and there is only one option that works for them: a crash-out no-deal that sends the currency tumbling and inflation soaring,” Hammond wrote in the Times.

 Calls for inquiry into claims Johnson backers benefit from no-deal Brexit | Politics | The Guardian

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They had three years to do this..

Leaked plans by Boris Johnson to build “customs clearance zones” on either side of the Northern Irish border after Brexit has been rejected as a “non-starter” by Ireland’s Deputy Prime Minister Simon Coveney. Irish outlet RTE reported on Monday evening that the United Kingdom government has proposed erecting customs posts on both sides of the border, where goods moving between the UK and the European Union would be checked. The customs posts – described as “customs clearance zones” in leaked documents seen by RTE – would be five to ten miles from the border, the report said. The UK reportedly submitted the suggestion to the EU in recent Brexit talks. With just weeks to go until the October 31 deadline, Brexit negotiations are at an impasse over the question of how to preserve the seamless border between Northern Ireland and the Republic of Ireland after the UK leaves the EU. 

Ex-prime minister Theresa May signed up to an insurance policy known as the backstop, which if triggered would keep the UK in a customs union with the EU, while Northern Ireland would effectively remain in the single market too. However, Johnson wants to backstop to be scrapped, and ruled out any possibility of either Northern Ireland or the whole of the UK remaining in a customs union with the EU after Brexit. Ireland’s Deputy Prime Minister Simon Coveney described “customs clearance zones” as a “non-starter” in a tweet on Monday evening, and called on the UK government to submit a “serious” proposal.

 Boris Johnson's leaked Brexit plan for Northern Ireland border checks rejected by the Irish as a 'non-starter'

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Project Fear, it turns out, was no project fear. Its forecast of lower investment (now 26% below other recoveries), lower growth (3% below trend as forecast) and a reduction in sterling’s value (18% down) were all correct or erred on the over-optimistic. Investment in the car industry has plummeted from £4.5bn in 2014 to a projected £200m this year. Nothing like this has happened in a major industrial sector since the Great Depression of 1931. Under Johnson’s already near-dead Brexit proposal, car companies will wind down their UK operations gradually; under no deal, they will simply close or exit as just-in-time production becomes impossible. Similarly hit: pharma, biotech and aerospace. Even the buoyant service sector is being infected: the IHS Markit business confidence indicator last week fell below 50, foretelling recession in services next year.

Overall, there can only be economic stagnation-cum-recession in 2020 and 2021; if there is no deal, in some sectors it will become a slump. The notion that slow-to-negotiate trade deals with Australia and the US will ride to the rescue is pure fantasy – the volume of trade is a fraction of that with the EU. The EU is an economic safe harbour. More than that. Britain is a European country with a European vocation. There is no deal better than the one we had, being full members of the EU.

 There is only one route out of the Brexit maze and Jeremy Corbyn must lead the way | Will Hutton | Opinion | The Guardian

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But set behind the important complexities of Irish regulatory alignment and the PM's reference to "de minimis" customs checks in Ireland is a more fundamental shift about the overall shape of a future relationship with the European Union. It is a substantial change from the deal negotiated by Theresa May that would have seen the UK, in Boris Johnson's words, as "closely integrated" with EU custom arrangements and "aligned with EU law in many areas". The PM wrote to Jean Claude Juncker: "That proposed future relationship is not the goal of the current UK Government". That is why he says the backstop is a "bridge to nowhere". But in overall economic terms it is vitally important in and of itself. 

The new plan means we will no longer be closely integrated or aligned with EU law in many areas, and that is therefore of significant consequence to those industries dependent on existing frictionless trading arrangements. In the notes accompanying the PM's proposal it says there is "no need for the extensive level playing field arrangements envisaged in the previous Protocol". The 25 pages of such arrangements covering taxation, environmental protection, labour standards, state aid and competition have been deleted from the legal text handed to the EU. In fact, for many Eurosceptic rebel MPs this is the very reason they now back these proposals. But the level playing field commitments were also a key part of the Political Declaration agreed by Mrs May too that envisaged "comprehensive arrangements [that] will create a free trade area combining deep regulatory and customs cooperation, underpinned by provisions ensuring a level playing field for open and fair competition".

But the reason Mrs May tried to negotiate these points was because she wanted to leave open a path to continuing frictionless trade with the European Union for those sectors that wish for it, require it, and indeed have been built up in the UK on this basis.

 Will Johnson's Brexit plan work for business? - BBC News

• Apart from changing the backstop for something amorphus, there is a significant shift away from aligning with the EU and this will increase frictions for those industries that are dependent on the EU, stuff like just-in-time supply chain management will get complicated.
  

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From 7/10/19:

Just one-third of those questioned think Boris Johnson should crash the UK out of the EU without a deal if he cannot reach agreement with Brussels this month

 Boris Johnson news live: Latest Brexit updates as poll shows no-deal support plunging

And reaching a deal with the EU seems pretty difficult as they slammed the British proposals:

The European Union’s full devastating point-by-point rejection of Boris Johnson’s Brexit proposals for the Irish border has been revealed in documents obtained by the Guardian. Leaked documents lay bare the scale of the multiple faults highlighted to David Frost, the prime minister’s chief negotiator, during the recent talks. The disclosure follows the prime minister’s claim on Monday that he had not yet heard the EU’s thoughts on the legal text tabled by Downing Street, under which a customs border would be reimposed on the island of Ireland. Under the draft text, which the UK has not published in full, Northern Ireland would stay in the EU’s single market for goods and electricity if Stormont consents, giving the DUP a veto before the arrangement comes into force and then every four years.

 Revealed: the EU's point-by-point rejection of Johnson's Brexit plan | Politics | The Guardian

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So what would this mean for the economy? Based on the reduction in trade alone, under May’s deal (assuming no productivity effect, on which more in a moment) income per capita would have been 1.7% lower than under membership. The equivalent figure for the Johnson deal is 2.5%, while that for a World Trade Organization Brexit (no trade deal at all) is 3.3%. However, economists are convinced that reductions in trade also affect productivity. The literature suggests that a 1% decline in trade reduces income per capita by about 0.5%. If, then, we combine this productivity effect with the trade impacts summarised above, we arrive at per capita GDP figures of -4.9%, -6.4% and -8.1% for May’s deal, Johnson’s proposals and a WTO Brexit respectively, as compared with membership.

 Boris Johnson’s Brexit deal would make people worse off than Theresa May’s | Anand Menon and Jonathan Portes | Opinion | The Guardian

• Not given the attention it deserves but Johnson aims a much looser tie to the EU compared to the deal Theresa May negotiated, and this significantly increases the impact on trade with the EU (and slows productivity growth more as a result). The upshot is that the negative economic impact is significantly higher under a Johnson deal.
  

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Johnson’s deal is predicated on the fiction that Britain has more to gain from new trade deals with faraway countries than from maintaining frictionless trade with our nearest neighbours, which already account for half our trade, as part of the world’s most powerful trading bloc. The government’s own figures show that a hard Brexit – outside the customs union and single market – will leave every household more than £2,000 poorer..

 Here’s why Boris Johnson’s plans have every chance of falling apart | Tom Kibasi | Opinion | The Guardian