A tumbling pound, a shaky stock market and the future for business about as clear as a heap of steaming mince: it’s hard to discern a worse outcome than the political and constitutional chaos we are now in.
The two biggest immediate problems for business are a gathering rush to stockpile supplies ahead of a possible “no deal” Brexit outcome and a further drying up of business investment. And all the while economic growth is already showing signs of stalling.
Another few weeks of this cliff-edge drama with little by way of an exit in sight and the UK could be teetering on the brink of recession by the spring of next year.
For Scotland, any one of a range of tumultuous outcomes is possible – and with deeply unsettling consequences for business. These include a no-deal exit with confusion and delays at borders; a second referendum on EU membership that would open the door for a second referendum on Scottish independence; and acceptance of the Prime Minister’s draft agreement that would leave the UK in a customs union for an indeterminate future and with the long-term status of Northern Ireland in growing doubt – creating a constitutional “read across” for the SNP administration.
Amid all this, and the spectre of a general election with a possible Labour victory putting Jeremy Corbyn in No 10, it’s little wonder many investment decisions are being put on hold.
A widely voiced concern is that the UK will not have the sovereign right to withdraw from the backstop arrangement involving a UK-EU customs union. The Prime Minister’s reply to this was a fudge. The European Court of Justice (ECJ) would keep its current jurisdiction and powers during any transition period.
And in the absence of any long-term EU-UK trade agreement after the transition period, the so-called “backstop” arrangement would take effect. This includes a separate dispute resolution procedure – one still ultimately bound by the ECJ’s interpretation of EU law.
This has fuelled concern that the barely disguised “backstop” comes with no unilateral way to withdraw from it. It is certainly hard to imagine an SNP administration agreeing to such an outcome were an independence vote to prevail in a second referendum.
However, all this is seen by many as preferable to a “no deal” which, supporters point out, would save the UK £39 billion and bring an end to EU tariffs on a wide range of goods – with benefits to companies and consumers.
Thus do the arguments rage. And given the tumult of the past week, it is understandable that the business focus has been on the immediate implications here at home – for just-in-time manufacturing, for our fishing industry and for our 300,000-plus small and medium-sized companies in Scotland concerned at being left at the mercy of EU regulation in the formulation of which they will have no say.
But to despair is a sin. Out of this morass is set to come pressure for resolution and demands to safeguard investment, jobs and living standards from the debilitating morass of the past two years. And however improbable it seems now, such pressure is as likely to come from within the EU itself as from within the UK.
The signals from Brussels at present are that the draft agreement is not open to re-negotiation. I am not sure that position will hold as the implications of a no-deal departure draw closer.
It is not only that EU trade in goods from cars to manufacturing components, from foodstuffs to pharmaceuticals, would face disruption. Of growing concern is the impact that UK withdrawal would have on the stability and coherence of the EU itself.
A marked slowdown is already evident across the Eurozone. Flash estimates from Eurostat in the past week put Eurozone growth in the July-September quarter at just 0.2 per cent. In Italy third-quarter growth is reckoned at zero, and in Germany GDP is forecast to have fallen by 0.2 per cent compared with the second quarter.
By contrast, growth in the UK is put at 0.6 per cent compared with the second quarter and up by 1.5 per cent on the same period last year. France’s finance minister, Bruno Le Maire, has warned that the euro is dangerously vulnerable to a global downturn many believe is now under way.
Here we worry about a debt-to-GDP ratio of 80 per cent. But in Spain, this debt ratio has risen from 36 per cent in 2007 to 98 per cent; in Portugal it is up from 68 per cent to 125 per cent; in France from 65 per cent to 99 per cent and in Italy from 103 per cent to 133 per cent. And this is the country whose Lega-Five Star coalition is on course for a defiant fight with Brussels over budget constraints. The European Central Bank is hardly in a position to ride to the rescue with cheap money – interest rates are already minus 0.4 per cent.
This is the backcloth against which the Eurozone would have to absorb the shocks – economic, financial and political – of a UK no-deal exit. All the focus so far has been on the likely impact on the UK economy. But both sides would be hurt. The EU is far from impregnable when it comes to the consequences of the exit of one of its largest – and net budget contributing – members. It is this vulnerability that helps explain the determination of Brussels negotiators to discourage a UK exit – but also, when other avenues look to have been exhausted – encourage EU negotiators to avoid “crash-out”.
Both sides have a keen economic interest in avoiding such a showdown – though, in true Brussels tradition, little by way of drawback and compromise can be expected until the early hours of the morning and at the very last minute.
However, before we get there, the UK government has to find a way through an immediate Conservative backbench challenge to the Prime Minister; to convince the EU of further negotiation, and last, but by no means least, to secure a deal that stands a chance of winning majority support in parliament. And for the moment the odds of all these cards falling into place do not look good.