Flextension: Road to nowhere
The UK has a reprieve as the EU granted a second delay to Brexit. But does this mean that growth can recover in the UK – and perhaps even the eurozone – or does this just mean a bigger crash later on? The episode reminds us of those old Roadrunner cartoons in which the Roadrunner would hurtle towards the cliff ’s edge, chased by Wile E. Coyote. At the last second, the Roadrunner would stop, but Wile’s momentum would take him over the edge, where he would hang suspended for a few seconds before plummeting to the ground. It seems that the UK has jumped off the Brexit cliff, but it’s suspended in mid-air, and the question
now is whether it can agree on a deal that stops it crashing to the ground.
Does more time mean more scope for a deal to emerge that can pass through parliament? If only it were that easy. The chances are that delay gives MPs more time to argue, free from the time constraint that had previously been applied.
Analysts agree that more time means more time for parliament to fail to find a way forward. Everything has been rejected before now, except a no-deal exit, but even this choice has been removed for a while given the EU’s decision to grant the UK a longer extension than the government wanted.
All that’s left now to end the farce is for the UK to hold a second referendum which sees the country decide that it does not want to leave after all. Could any country have gone through greater self-injury outside of wartime? A second referendum might not happen at all, because politicians claim it will cause too much uncertainty! The damage to the economy has been significant (shutdowns of factories, stockpiling, relocation of the workforce etc.) so far but it will be only the tip of an iceberg ahead, regarding the Bank of England’s forecasts.
I made a field trip to Bursa and Istanbul, during the last week of March. After a business conference in Bursa, I had a chance to meet a couple of executives in Istanbul as well. At that time, everybody that I spoke with stood on pat for the upcoming local elections. After the voting process passed, businessman waited for the announcement of the economic programme. It came and passed as well, just like a letter of intent without any detailed roadmap to convince investors. Just like the Brexit saga, the programme may already become an economic myth after all.