So @BorisJohnson allies “want to see Brexit on the business pages, not the front pages,” one recently told me. They're *very keen* to dial down the temperature in phase 2 talks. Can this be squared with no extension to transition & divergence? A thread on #Brexit in 2020 1/
There's been lots of talk about @BorisJohnson love bombing the EU. I suspect Govt will try & use @vonderleyen arrival at @EU_Commission & UK imminent departure to reset ties. But make no mistake - on substance, this is a Govt that is harder - & much more determined 2/
All the key voices in Govt - @BorisJohnson @michaelgove Cummings & @DavidGHFrost believe in diverging from EU rules. The principle more than its objective benefits. Instinctively & intellectually. The ability to now do things differently will guide UK's approach in phase 2 3/
What of the Tories new working class Labour voters? Won't they force a softening? Not necessarily. Of course there'll be a demand from new Tory MPs to protect supply chains & manufacturing jobs from tariffs & regulatory barriers that will arise if UK diverges from EU standards 4/
But many influential players in the Govt believe these voters will favour a quick deal to deadline & a tougher approach to immigration. They don't necessarily push the Govt down the path of a softer Brexit. The assumption they do could prove to be lazy & dangerously wrong 5/
Businesses in auto, aerospace, pharmaceuticals & chemicals sectors are already very concerned about the loss of frictionless trade that comes from exiting the Single Market & Customs Union. Actively diverging from EU rules as a political choice is a *totally* different matter 6/
With no extension to transition likely (could @BorisJohnson, as his first act in phase 2, sit down & begin discussing how many extra €bn he needs to send to EU?) that leaves 7 months - 7 negotiating cycles - to do the deal (March-September). Ratification will take 2-3 months 7/
That means there's very limited room for creativity. The punctuated deadline either pushes the UK to a high alignment, rule-taking equilibrium or a more minimal, low alignment equilibrium (barebones deal) - with the risk of meaningful economic disruption between the two sides 8/
Given the Govt's political priorities, all of the more complex chapters - services, aviation, data-sharing, security and much more besides (except fish!) arguably get kicked out to a later date, regardless of what's stipulated in the Political Declaration 9/
Does @BorisJohnson blink? Become a rule taker but argue he isn't (just like he continues to argue there'll be no regulatory & fiscal border in the Irish Sea?) Perhaps. But very late in the game - the third quarter or even later, & only after much fanfare in Bxl 10/
Based on how strong the divergence narrative is at the heart of Govt, that's by no means guaranteed. Equally plausible is a hard & fast Brexit, front-loaded at the beginning of Johnson's term, with substantial macro (fiscal & monetary) easing to cushion the economic blow 11/
A more assertive industrial policy - including a “buy British” procurement policy & state aid for struggling companies could also become an instrument of microeconomic policy this Govt chooses to employ, again exacerbating tensions with Bxl (EU is on high alert about this) 12/
The drama will begin on Weds with @vonderleyen visit to @10DowningStreet. My suspicion is 2020 is going to be another noisy year, with Brexit risk still dominating the headlines - even if the transition baseline limits how bad things can actually get over the next 12 months 13/
Full argument in @guardian here: theguardian.com/commentisfree/…
