

Brexit: "flabbergasting complacency" 20/11/2017

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One of the very few articles of interest in the legacy media this weekend was to be found in the



This follows on from earlier reports, such as Guardian which reported that the Dutch parliament's European affairs committee had told the country to prepare for a chaotic, no-deal Brexit.



But, in fact, we'd become aware of the EU development at the Sunday Times is three weeks behind the curve – not untypical for the legacy media, although in many instances it's taking years for them to catch up on the basics.



However, the merit of the current piece is in the detail, not least in having officials say there is a "significant likelihood" that Britain could crash out of the bloc following a collapse of Theresa May's government.



The contingency plans, though, seem to be composite affairs being prepared by the European Commission and by Member State authorities. Unsurprisingly, they indicate the need for the expenditure of "hundreds of millions of pounds" in preparing for the eventuality.



At the EU level, the task force is being headed by Belgian Pascal Leardini, while European capitals are doing their own planning. The Commission's role is to propose "best practices" to be adopted as part of a common strategy to deal with a failure of the Brexit talks.



Meanwhile, countries such as Holland and Belgium are bracing for "miles of queues" at key ports such as Rotterdam and Zeebrugge. The Dutch have said that they would have to hire around 800 customs officers, but officials complain that it would be "impossible" to find that many qualified workers and training new ones could take "years".



The Dutch are being quite forthcoming on what they call noodverband - an "emergency bandage". A senior official says that the EU was "working to get a deal" while at the same time "preparing for a disaster". Officials are looking into how many computers, parking places, customs officials and other provisions need to be budgeted for.



What is striking is the lack of optimism. The Dutch are saying: "It's starting to be doubtful whether the UK government can steer the Brexit ship because the leadership is so weak". The German government thinks the likelihood of a no-deal Brexit had now become "significant".



"A no-deal outcome would be an irrational, systemic failure of colossal proportions … but the likelihood of it is now significant and we are working to minimise cost and disruption", says a senior German finance ministry official.



Belgian firms are asking their government how to adjust to customs procedures for the worst-case scenario, said a senior official from the country's economy ministry: "Half a year ago we were optimistic, now we are convinced that a no-deal is a likely option".



Thus, businesses based outside the UK which are operating in Britain are also receiving guidance on the need to prepare for the UK crashing out of the EU’s single market. "It's an extremely muddy picture of the future, and an infinitely variable one. The longer there is uncertainty, the tougher things get - we have decisions to make about future investment", said Graham Biggs of BMW.



Quote of the month, though, goes to Winand Quaedvlieg, of the Dutch employers' federation VNO-NCW. He says UK companies were showing "flabbergasting complacency" about Brexit. "It is as if chief executives can't believe a government would cause such an economic mess", he adds, before confirming that "Dutch companies are preparing for the worst".



This complacency was something we noted



Not only did we see this in relation to the "no deal" scenario but also to the impacts of leaving the Single Market. There seems to be an almost child-like faith in the ability of government to pull off a last minute deal, regardless of warnings from EU negotiators and officials that no concessions would be made which threatened the integrity of the Single Market.



There is also a startling emphasis on the effects of tariffs, with little discussion or concern about non-tariff barriers, despite their potential effects being far more serious. Combined with an inchoate belief by some commentators that businesses will somehow "adapt" to the new circumstances, we have the makings of a perfect storm, where the cumulative effect of the newly experienced barriers will bring international trade to an almost complete halt.



However, the sheer scale of the impacts is such that shippers have difficulty believing that the government would allow major adverse effects to arise. The belief that everything will be "alright on the night" thus dissuades businesses from making contingency plans.



We have, therefore, what amounts to a credibility gap – the distance between what businesses might be told what could happen in theory, against their expectations of what will actually happen. Warnings of theoretical harm are not taken seriously when the belief is that official intervention will ensure that any harm is avoided.



This is against the context where nothing even remotely similar to Brexit has ever been experienced. The process is unique, so there is nothing that can be used to shape expectations. Government, in the meantime, will want to play down any adverse consequences of it policies, primarily so as to avoid giving hostages to fortune or weakening its negotiating position.



To all this has to be added the sheer complexity of the EU's trading system, which actually renders identification of potential consequences quite difficult. Advisors and commentators are simply failing to understand how systems will be affected by Brexit.



Faced with all this and the need for businesses to maintain customer and investor confidence, there is naturally a tendency to gloss over any potential problems, or keep discussion of them out of the public domain – which further limits appreciation of the scale of the threat and the ability to devise suitable and timely countermeasures.



Between business representatives and government – particularly at high level, where trade associations are involved – there is also something akin to Stockholm Syndrome, where the two sides unite in the common cause of playing down bad news – which can be injurious to both sides.



Then, government has powerful leverage in granting or withholding access to Ministers and senior officials, and is capable of penalising those who "rock the boat" by going public with comment seen to be critical of government policy or reducing confidence in government.



Despite a perfect storm brewing, therefore, there are strong influences which prevent businesses acknowledging the severity of the threats they confront, or making plans to mitigate their effects. And this is without the political interplay and the effect of certain actors playing out their own agendas.



Where, as it is often said, the spectator sees more of the game, it is unsurprising that the Dutch are seeing "flabbergasting complacency" where nothing of its kind is being acknowledged this side of the Channel. Sadly though, because it is not seen does not mean it does not exist. And breaking out of the torpor can be very painful indeed. One of the very few articles of interest in the legacy media this weekend was to be found in the Sunday Times informing us that an EU task force had been set up in Brussels to prepare plans for Brexit no-deal "disaster".This follows on from earlier reports, such as this one in thewhich reported that the Dutch parliament's European affairs committee had told the country to prepare for a chaotic, no-deal Brexit.But, in fact, we'd become aware of the EU development at the end of October , so theis three weeks behind the curve – not untypical for the legacy media, although in many instances it's taking years for them to catch up on the basics.However, the merit of the current piece is in the detail, not least in having officials say there is a "significant likelihood" that Britain could crash out of the bloc following a collapse of Theresa May's government.The contingency plans, though, seem to be composite affairs being prepared by the European Commission and by Member State authorities. Unsurprisingly, they indicate the need for the expenditure of "hundreds of millions of pounds" in preparing for the eventuality.At the EU level, the task force is being headed by Belgian Pascal Leardini, while European capitals are doing their own planning. The Commission's role is to propose "best practices" to be adopted as part of a common strategy to deal with a failure of the Brexit talks.Meanwhile, countries such as Holland and Belgium are bracing for "miles of queues" at key ports such as Rotterdam and Zeebrugge. The Dutch have said that they would have to hire around 800 customs officers, but officials complain that it would be "impossible" to find that many qualified workers and training new ones could take "years".The Dutch are being quite forthcoming on what they call- an "emergency bandage". A senior official says that the EU was "working to get a deal" while at the same time "preparing for a disaster". Officials are looking into how many computers, parking places, customs officials and other provisions need to be budgeted for.What is striking is the lack of optimism. The Dutch are saying: "It's starting to be doubtful whether the UK government can steer the Brexit ship because the leadership is so weak". The German government thinks the likelihood of a no-deal Brexit had now become "significant"."A no-deal outcome would be an irrational, systemic failure of colossal proportions … but the likelihood of it is now significant and we are working to minimise cost and disruption", says a senior German finance ministry official.Belgian firms are asking their government how to adjust to customs procedures for the worst-case scenario, said a senior official from the country's economy ministry: "Half a year ago we were optimistic, now we are convinced that a no-deal is a likely option".Thus, businesses based outside the UK which are operating in Britain are also receiving guidance on the need to prepare for the UK crashing out of the EU’s single market. "It's an extremely muddy picture of the future, and an infinitely variable one. The longer there is uncertainty, the tougher things get - we have decisions to make about future investment", said Graham Biggs of BMW.Quote of the month, though, goes to Winand Quaedvlieg, of the Dutch employers' federation VNO-NCW. He says UK companies were showing "flabbergasting complacency" about Brexit. "It is as if chief executives can't believe a government would cause such an economic mess", he adds, before confirming that "Dutch companies are preparing for the worst".This complacency was something we noted a week ago , with UK business leaders consistently under-rating the consequences of Brexit, right across the board.Not only did we see this in relation to the "no deal" scenario but also to the impacts of leaving the Single Market. There seems to be an almost child-like faith in the ability of government to pull off a last minute deal, regardless of warnings from EU negotiators and officials that no concessions would be made which threatened the integrity of the Single Market.There is also a startling emphasis on the effects of tariffs, with little discussion or concern about non-tariff barriers, despite their potential effects being far more serious. Combined with an inchoate belief by some commentators that businesses will somehow "adapt" to the new circumstances, we have the makings of a perfect storm, where the cumulative effect of the newly experienced barriers will bring international trade to an almost complete halt.However, the sheer scale of the impacts is such that shippers have difficulty believing that the government would allow major adverse effects to arise. The belief that everything will be "alright on the night" thus dissuades businesses from making contingency plans.We have, therefore, what amounts to a credibility gap – the distance between what businesses might be told what could happen in theory, against their expectations of what will actually happen. Warnings of theoretical harm are not taken seriously when the belief is that official intervention will ensure that any harm is avoided.This is against the context where nothing even remotely similar to Brexit has ever been experienced. The process is unique, so there is nothing that can be used to shape expectations. Government, in the meantime, will want to play down any adverse consequences of it policies, primarily so as to avoid giving hostages to fortune or weakening its negotiating position.To all this has to be added the sheer complexity of the EU's trading system, which actually renders identification of potential consequences quite difficult. Advisors and commentators are simply failing to understand how systems will be affected by Brexit.Faced with all this and the need for businesses to maintain customer and investor confidence, there is naturally a tendency to gloss over any potential problems, or keep discussion of them out of the public domain – which further limits appreciation of the scale of the threat and the ability to devise suitable and timely countermeasures.Between business representatives and government – particularly at high level, where trade associations are involved – there is also something akin to Stockholm Syndrome, where the two sides unite in the common cause of playing down bad news – which can be injurious to both sides.Then, government has powerful leverage in granting or withholding access to Ministers and senior officials, and is capable of penalising those who "rock the boat" by going public with comment seen to be critical of government policy or reducing confidence in government.Despite a perfect storm brewing, therefore, there are strong influences which prevent businesses acknowledging the severity of the threats they confront, or making plans to mitigate their effects. And this is without the political interplay and the effect of certain actors playing out their own agendas.Where, as it is often said, the spectator sees more of the game, it is unsurprising that the Dutch are seeing "flabbergasting complacency" where nothing of its kind is being acknowledged this side of the Channel. Sadly though, because it is not seen does not mean it does not exist. And breaking out of the torpor can be very painful indeed.





