I have not written about Brexit recently, as unfortunately all this turmoil has been very predictable and leaves me nothing to add. But there are a couple of areas where I have found the reporting confusing and wanted to lay out my thoughts.
What is the “Will of the People” now?
This is still a mess and there is no outcome which will not leave large part of the country feeling alienated and angry. My read on the polls is that the exact phrasing of the question makes a big difference to the answer, meaning that all sides can take something to support their case.
YouGov do some of the better polling: https://bit.ly/2HYOlQr
It is striking that every outcome still has a net negative opinion set against it. You could make a case, from the above, that the debate should be between soft Brexit and Remain. But asking the question slightly differently could end up with rather different interpretations. This is often made worse by the fact that despite all the tribal anger, many people’s views are remarkably soft or inconsistent. In this situation, context and framing can make all the difference to the outcome. For example, there are many who think No Deal is a bad outcome but prefer it to an extension, perhaps because they believe (falsely) this will bring an end to Brexit argument rather than form the start of even worse ones.
No Deal – ending place or pathway?
No Deal is by far the most popular option for Leave voters, supported by 70% of them. I think its popularity arises because it exactly represents the absence of any decision on the tricky key points of Brexit, thus allowing people to continue to deny the trade-offs and difficult decisions that need to be made. All the Brexit outcomes fail to deliver on the promises of the Leave campaign and so supporting any of the deals means admitting that the Leave promises were not true. In this regard, given that No Deal delivers nothing at all, it cleverly holds out the promise of magical endings and the continuation of the dream.
It is generally agreed that the initial stage after No Deal will be economically damaging. Opinions vary widely on how bad it will be, which is reasonable given this type of economic shock is rarely seen. I would expect it to be at least as damaging as the 2008 financial crisis, others think it will not be so bad which justifies their support. I do not want to go over this debate as what I find more interesting is where we are heading. It is always publicly discussed as though No Deal is a decision and thus an end point for Brexit, but it is, in fact, just the beginning of a whole new process.
Global Britain?
A key point to No Deal seems to be that it means the UK can make independent trade policy and strike new deals. As an aside I see this as one of the many disadvantages, as the UK would get far worse trade deals as a stand-alone country than it currently has as part of the EU, but to some at least it’s a truly British, bad deal as opposed to a EU good deal. To illustrate how these trade negotiations might go, I think useful to pick an example.
We can start with by far our largest trading partner, the EU, which accounts for approaching half of all our exports and so would be the deal we most urgently need. The EU has already laid out their preconditions for trade talks. Funnily enough, they are almost identical to the Withdrawal Agreement (May’s deal):
- Irish border
- Money
- Citizen rights
- but without the offer of a transition arrangement.
I would expect the UK to refuse this initially. The No Deal true believers will never change their mind, believing that we can live without any sort of formal trade deal with the EU, although from the above polling they are at most 25% of the population. Even now, 50% already see No Deal as a bad outcome and when reality strikes, I would expect that number to rise rapidly. Once public opinion shifts, then I expect us to agree to the EU’s terms. No Deal becomes a painful, chaotic and humiliating path to May’s deal. This is the same route that Greece took in 2015 and, along with a last-minute deal, has been my main prediction for Brexit.
No Deal Planning
This video describes the current process. It is “all about confidence”
The quote at 2.41-43 perhaps the best summary.
https://www.youtube.com/watch?v=Y–i9lNqLjM
Remain
Where my view has changed the most is on prospects for Remain. I outlined before I thought it required too many independently unlikely things to happen. But quite a few have.
Most importantly:
- Brexiteers absolutely refuse to vote for Brexit. Consistently and in large numbers.
- May is an extraordinary person, rivalled perhaps only by Corbyn in her obstinacy, and has alienated everyone from her deal while refusing to countenance any other outcome
- Opinion polls are shifting towards Referendum and Remain
- The Labour party is manoeuvring itself around Corbyn, its Brexiteer leader.
The part of the polls I find most compelling is the trend towards Remain https://pollofpolls.eu/GB/23/post-brexit-eu-membership-polls
These polls are volatile, but I think that the move from the high point of Leave, the 2017 General Election, to the current lead for Remain, is very clear. It certainly looks shaky to claim that Leave is the “Will of the People”.
What is more interesting is what has driven the change in the polls over the past 3 years. It is not really from those who voted now changing their minds; once people state a view in public, they rarely change it, no matter what the fresh evidence.
What seems to matter more is demographics, tied to the fact that in the original referendum by far the best predictor of vote was the person’s age. What’s especially interesting is that we have not seen Remain voters switch to Leave as they get older the way that young Labour voters turn into middle-aged Conservatives. This suggests a voting pattern attached to a generational cohort, whereby beliefs are built around the notions of identity and culture which different generations feel differently.
Every year, there are 750,000 new 18-year olds who can vote, and unfortunately over 500,000 deaths (92% of those over 50). In the cohort view above, over time a switch will occur from a small Leave majority to a ever greater Remain majority. This means that the longer that Brexit is delayed, the more likely it is that the polls continue to drift towards Remain and we end up with a new Referendum.
The Conservative Party as the party of Brexit, faces a long-term crisis even if it manages to survive the current debacle as younger voters may forever find them toxic. The Labour Party has a long-term opportunity to embrace Remain and align themselves with the future majority of the electorate.
Applied Macro 