A Brexit Civil War at Home, Davos Exposes UK’s Weakness not Strength

Normal people hate the deluge of publicity and news coverage from Davos, the Magic Mountain in Switzerland as Thomas Mann called it, because it throws into sharp relief the gross inequality in the world. Multi-billionaire executives rubbing shoulders with authoritarian leaders at champagne receptions is always going to leave a sour taste.

Odd then, that Theresa May thought that by attending the World Economic Forum’s annual bash last week that some of the glamour would rub off on her and take away some of her robotic reputation. Instead, Britain’s interventions at the global rich person’s club has only acted to highlight our country’s diminished economic, international, and domestic standing. Not bad for a week’s work.

On the economic front, Chancellor Philip Hammond let the cat out of the bag when he told business leaders in the Swiss ski resort that the government would seek only “modest” changes in its relationship with the European Union. “We are taking two completely interconnected and aligned economies with high levels of trade between them, and selectively moving them, hopefully very modestly, apart,” Hammond said.

Hammond was always a Remainer but his comments indicate that the reality of the prospect of a hard Brexit or a no deal scenario is starting to scare the Treasury.

There is a growing sense of optimism among the growing tribe of anti-Brexiters in both Parliament, the electorate, and the business and economic communities. Carolyn Fairbairn, the head of the CBI that held the lunch where Hammond spoke, has called for the UK to remain in a customs union with the EU.

Mark Carney, the Governor of the Bank of England, has broken cover, to warn that the vote for Brexit had already removed about 1 per cent from the economy that a “deeper the relationship” with Europe would be the better for the economy.

It is also worth noting that the UK was the only major economy for which the International Monetary Fund did not raise its 2018 growth forecast at the latest update to its outlook hat it published in Davos. At 1.5%, the UK will be the slowest growing of any equivalent economy other than Italy and Japan.

Forced to take sides, May inevitably made the wrong choice

Meanwhile a survey of businesses has found that more than 60 per cent of companies had either implemented contingency plans to cope with the risk of Britain’s crashing out of the EU without an agreement or intended to do so.

Hammond’s sensible intervention sparked a civil war within the ranks of the Conservative party, led inevitably by Jacob Rees-Mogg, who seems to have replaced Foreign Secretary Boris Johnson as the media’s go-to Brexiter.

Rees-Mogg used a speech the day after Hammond’s intervention to accuse the government of being “cowed” by Brussels in the Brexit talks and said Hammond’s approach to Brexit was like treating is as “managed decline”.

Forced to take sides, May inevitably made the wrong choice leaving a Downing Street spokesperson to spin that while the government wants a “deep and special economic partnership with the EU after we leave, these could not be described as very modest changes”.

If economic disarray and political civil war were not enough, May went on to hold a high-profile meeting with Donald Trump, the one person who can heal a divided Britain where he garners a disapproval rating of 63 per cent.

By re-offering a state visit to the UK to a man who declined to come to open his country’s London embassy, she revived the widespread feeling of revulsion experienced last year after she visited Washington soon after his election and held his hand.

All taken together, the British delegation will have returned to London with their tails between their collective legs, leaving behind many raised eyebrows among the global audience who International Trade Secretary Liam Fox is so desperate to do business with.

In Mann’s novel, tubercular patient Hans Castorp spends seven years in Davos in the run-up to the First World War nursing himself back to health. As war begins, Castorp volunteers for service and the reader is left with the feeling that his demise on the battlefield is imminent. The parallels are probably too obvious to spell out.

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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