UK businesses crave an end to uncertainty, but face a rocky future as the country’s options finally narrow. Boris Johnson, the clear frontrunner in the Conservative party’s leadership contest, has indicated that he would pursue a no-deal Brexit if other options were to fail; a strategy that Parliament has already deemed unacceptable.
While this would finally put a clear and reliable end-date on the seemingly endless process, it has also alarmed businesses, investors, and foreign and domestic governments. Not least of these is First Minister Nicola Sturgeon of Scotland, who has indicated that her party will pursue a renewed push for Scottish independence in the wake of a no-deal Brexit.
How likely is a no-deal Brexit, really?
On the campaign trail, Mr. Johnson has described the likelihood of a no-deal Brexit as one in a million. In the very likely event of his victory in the Conservative leadership contest, however, he faces all the same problems as his predecessor. Worse, he has built his campaign on the idea of forcing the EU to offer concessions by withholding the funds that the UK would owe the EU under their previously agreed divorce bill. This undiplomatically blunt approach is unlikely to succeed, as EU leaders could not bow to Johnson’s bluster without destroying their own credibility and their political careers, even if they felt it were otherwise prudent to do so—which none appear to at the time of writing of this article.
Effectively, this puts a potential Johnson government into a deadlock with the EU before it has even been formed. Without the option to delay Brexit further, the only way out for politicians on either side of the channel to preserve their own interests is a no-deal exit from the bloc. Far from one in a million, this makes it by far the most likely form of Brexit. Through their actions, it appears that both business owners and foreign investors are fully aware of this, and taking it very seriously.
Foreign investment is moving to France and Germany
The amount of foreign investment flowing into the UK has begun to decline, even as it has begun to rise in France and Germany. At the same time, the number of new jobs created in the UK has sunk by a drastic 25 per cent in the past year. While the value of the pound has remained competitively low, the draw it represented for foreign investors since the initial Brexit vote is finally losing some of its potency.
This conforms to predictions offered by British and European economists as far back as during the Brexit campaign. EU governments, meanwhile, welcome this new investment as a way to offset the impending loss of the UK. While this change has been ongoing, Johnson’s impending ascendancy is an alarming escalation for businesses, who had continued to hope for a measured approach. While the Conservative party has traditionally supported business interests, Johnson himself is more famous for the position he ineloquently stated in May of 2018: “F*** Business”.
Japan’s government weighs in
The economic impacts of Brexit are, of course, not limited to Europe or European businesses. Japan’s foreign minister issued a warning on June 27, saying that leaving the UK without a deal could force many of the 1,000 Japanese businesses operating in the UK to relocate to the EU. Nissan, Honda, and Toyota, all of which manufacture vehicles in the UK, have already issued statements indicating that they would consider leaving. Honda has already made the decision to close its plant in Swindon in 2021.
No-Deal could stir political uncertainty at home
If the UK does pursue a no-deal exit from the EU, it’s likely that the uncertainty faced by businesses around Brexit will be replaced by even more uncertainty. Nicola Sturgeon has indicated that the SNP would pursue another vote on Scottish independence if no deal could be reached. Similarly, Northern Ireland has little tolerance for a hard border with the Republic of Ireland. Secretary of State for Northern Ireland Karen Bradley has stated that this could result in Northern Ireland being placed under direct rule again, which is likely to stir up significant resistance.
The UK’s departure from the EU without a deal is becoming increasingly likely, regardless of who eventually becomes the UK’s new Prime Minister. A government led by Johnson promises to move the UK forward more decisively toward that end, but will likely only succeed in trading one ongoing uncertainty for a host of new ones that promise to be of no less significance.