Essentially Bust


The Brexit Party’s warnings to Boris Johnson and Dominic Cummings last night about not reheating the May withdrawal deal are nothing new. As if the Conservatives don’t know that May’s deal is a dead duck. The more important warning from the Brexit Party relates to money. £39Bn may not seem like that much money in the round of years of trade – let alone some of the forex deals that daily cross the desks of traders in London – but it’s money that worries the hell out of the EU. A clean break Brexit scares them as much as it rattles surrender-supporters in the UK like Benn and Cooper.

Speaking to the Daily Express Richard Tice has said this week that the EU’s only regret over the UK’s decision to leave is the loss of our money. He said without our financial contribution the EU is essentially bust. This is why, he claimed, that EU heavyweights have been saying they regret Britain’s decision to leave. He went on to say that leaving without a deal was the best option for the country to escape the EU’s daft rules and regulations.

Is Tice exaggerating? Perhaps not. 

Mr Tice said, “we are one of the major financial contributors so if we leave someone has to pick up our exorbitant bill. I’ve been saying for months that without our £39Bn they are essentially bust. That is why they are so desperate for us to pay the bill and we have been foolish enough to accept it.”

Nigel Farage has repeatedly condemned the clause in Theresa May’s withdrawal bill that forces us to pay the £39Bn. The fee is to deal with our previous spending commitments as well as a two year implementation stage. Boris Johnson has said that if we leave without a deal the money isn’t strictly speaking owing. The EU has attacked the Prime Minister on this point, saying that a future free trade agreement would be put in jeopardy if the money is not paid.

There is little remaining time for the Prime Minister to get a new deal with the EU. There appears to have been little in the way of negotiation going on to try to achieve it. If the plan is to leave without a deal the Prime Minister will have shot the Brexit Party’s fox. The question remains how he can get us out without a deal in the face of parliament’s opposition. If, on the other hand, the PM comes back with a deal the likelihood is that the Brexit Party will oppose any deal he comes back with and will put pressure on Tory MPs to oppose it too.

The perfect scenario is  a deal that no one opposes but it is highly unlikely the PM will be able to achieve that in the time that is remaining. If there is a way to leave on 31 October without a deal at least that will remove the threat of the Brexit Party altogether from a Tory perspective.

There is no doubt the EU will suffer from the loss of our financial contribution. It is an open question as to what they can do to fill the gap that our leaving will create. It would appear logical to think that this would be a reason to try to ensure they continue to trade with us on the best possible terms. The revenue from our trade could go some way to make up for the lack of our direct contributions. The only trouble is the EU doesn’t have logic at the heart of its decision making.

For our part the best possible outcome may be leaving without a deal. We could then keep the £39Bn and call the EU’s bluff on its own interest in free trade with us. We could get on with making free trade deals – out of necessity – with other countries around the world including the US. President Trump has said there is a huge amount more trade that could be done between the two countries in the event of a free trade agreement.

It may be that even in the event of a no deal exit we end up paying some or all of the £39Bn that the EU wants from us in order to try to ensure good future relations with the EU. It is not in our interest for the EU to go bust so this payment may be a sacrifice we end up having to make in order to keep the EU’s head above water. In the end our future trade with them should ensure that we make back the amount we hand over – that is sound business, whereas paying over £39Bn for nowt is not.