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Rees-Mogg’s populist approach will not help business

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There has always been an aspect of performance to Brexit, as those responsible for trussing up British business in the very same Brussels red tape they have spent two decades decrying, seek to distract from the consequences of their actions.

This can lead to some pretty topsy-turvy places, like the moment this week in the Commons when Natalie Elphicke, the Dover MP, complained bitterly about the traffic queues in her constituency, but blamed Brussels, not Brexit.

The people who should, of course, be blamed are Boris Johnson and Lord David Frost for concluding an agreement with the UK’s largest trading partner that failed so abjectly to obtain the facilities that might reduce those queues on the M20.

When the Commons public accounts committee this week warned of further queues to come as the UK introduced physical inspection on incoming goods later this year, Frost’s suggestion was simply to do away with the checks.

He cast this as a “benefit of Brexit” – making the UK’s borders nimbler than the EU – but it will feel like a very inequitable settlement indeed if British exporters face the full panoply of EU checks, while EU businesses sending goods in the other direction are waved into the UK through a light-touch border.

Brexiters tend to bemoan Brussels for what they see as its hostile and obstructive attitude towards trade, but the original sin was the Brexiters’ assumption that the EU would cut an easy deal simply because it ran a healthy surplus in goods with the UK.

The latest German-UK trade stats show just how spectacularly wrong that assumption turned out to be. The UK has tumbled down the list of German trading partners since Brexit, with UK-German trade shrinking, while German trade with the EU and rest of the world is growing.

But if the only detectable impact of Brexit abroad – to quote Dame Meg Hillier, chair of the cross-party public accounts committee this week – is “increased costs, paperwork and border delays”, then what about the dividends at home?

This debate – as previous editions of Britain after Brexit have explored in some detail – is far more nuanced than the traditional Remain-Leave ding-dong would have you believe.

The very short answer is that in new fields such as gene editing, cryptocurrency or artificial intelligence there should be incremental benefits, over time, from a bespoke UK regulatory system that, unlike the EU, is designed for a single country, rather than to corral the interests of 27.

This is a far cry from the “slash red tape” demands of traditional Tory Brexiter backbenchers, or the prescription of “one in, one out” for new regulations that is completely impractical in a world where we’re racing pell-mell into new and uncharted technological spheres.

Those simplistic formulas formed the backbone of Iain Duncan Smith’s Taskforce on Innovation, Growth and Regulatory Reform (TIGRR), alongside a belief that a “common law approach” to regulation would be superior to the EU penchant for codifying everything.

Again, this “common law” appeals to legal sovereigntists on the backbenches, but as the Chartered Trading Standards Institute warned in its response to the government’s proposals, for most businesses it would just create increased uncertainty, litigation, costs and burdens.

What was notable, therefore, about this month’s widely derided benefits of Brexit policy document was that there was not a single mention of the “common law”, or “one in, one out” approach to regulation.

Instead, the paper advocated a sophisticated UK regulatory framework based on suppleness and proportionality, where “regulators should work collaboratively with businesses to ensure there is a clear feedback loop between the regulated and the regulators”.

This is very much along the lines of the ideas espoused by experts in regulatory science such as Oxford university’s Professor Chris Hodges who believes that what he calls “outcomes-based co-operative regulation” could create a new paradigm for regulating the UK economy.

In simple terms, his approach reinvents traditional regulation – based on rules, inspections and sanctions – and replaces it with a trust-based model. This still contains penalties, but incentivises good behavior by responding with lighter-touch regulation for those entities that demonstrate themselves worthy of trust.

That does not mean no checks or balances – it only works if those who stray from the path get punished – but Hodges, who has the ear of senior officials in government, is convinced that such an approach could be genuinely transformational.

All of which is why the appointment this week of Jacob Rees-Mogg as minister for Brexit opportunities has a distinctly retrograde feel, with officials briefing journalists that he had been told to draw up an action plan with “1,000 regulations we want to get rid of ”.

It was not long before Rees-Mogg was writing in The Sun, rattling the tin for readers to drop in their ideas for slashing Brussels red tape, evoking Lord Kitchener’s first world war rallying cry of “Your country needs you” and promising The Sun’s readers “a real Brexit bonus in their pockets and in their lives every day”.

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Which brings us right back to how the politically performative aspects of Brexit so often trump the mundane but important reality of extracting benefits from our newfound position on the periphery of the advanced trading nations on our doorstep.

It would be nice to think that Rees-Mogg’s overtures to both Tory backbenchers and the pro-Brexit popular political base could happen in parallel with the more serious approach evident in the opportunities paper.

Perhaps, as he gets his feet under his ministerial desk, the penny will start to drop. But with Johnson’s government so transparently on the ropes there is a clear temptation to just keep playing to the gallery, when what industry really wants is a serious, consistent and outcomes-focused approach.

Do you work in an industry that has been affected by the UK’s departure from the EU single market and customs union? If so, how is the change hurting – or even benefiting – you and your business? Please keep your feedback coming to brexitbrief@ft.com.

Brexit in numbers

Line chart of Number of collaborations with EEA countries (000s) showing British business research links with Europe have dropped sharply

This week a fresh campaign was launched by scientists across Europe to get Brussels to complete both the UK’s and Switzerland’s associate membership of its € 95bn research and development program. They accused the EU of “putting political disputes ahead of science collaboration”.

The background is that it was agreed that the UK should take part in Horizon as part of the trade and co-operation deal negotiations. However, UK membership has been held up because of political disagreements, principally over the UK’s failure to make good on its own treaty commitments in Northern Ireland.

You might say (rightly) that this is unedifying, tit-for-tat behavior, but it is really just another example of where the EU is prepared to defend its wider collective interest against a recalcitrant non-member; even at the cost of shrinking German exports to the UK, or reducing mutually beneficial scientific collaboration.

Uncertainty is a killer when it comes to companies and universities agreeing collaborations. Damage has already been done to EU-UK business collaborations, as this October 2020 paper by Benjamin Osswald of the University of Illinois accounting department showed – even before the EU-UK deal on Horizon 2020 was signed.

The analysis of Horizon 2020 grant applications found that, while in 2016 UK companies had 15,900 international research partners in Europe, that figure had fallen to 8,300 by 2019, the last year for which data were then available. That’s nearly a 50 per cent drop.

By contrast, French, German and Italian research collaborations under Horizon 2020 over the same period expanded by between a quarter and a third, with France leading the way, growing from 11,400 collaborations to 15,400.

The UK government is developing a Plan B in case the Horizon deal cannot be closed, but the truth is – as the government’s willingness to hang on for Horizon shows – it will not compensate for being shut out of the neighborhood scheme.

That’s just another incentive (as it is clearly meant to be) for Liz Truss to get on and do a deal over implementing the Northern Ireland protocol. But with a potential leadership contest looming and elections approaching in the region, that will be easier said than done.

And, finally, three unmissable Brexit stories

Spirit Liz Truss is the subject of my first recommendation this week. My colleagues George Parker and Laura Hughes have written an in-depth feature for the weekend magazine on the politician the tabloid press like to call “Queen Liz”. Talk of the foreign secretary replacing her chaotic boss no longer seems fanciful, they write. Some, though, see her rise as some kind of a political joke.

Martin Wolf focuses on the UK economy in its column this week and its particular exposure to inflationary risks. “The government might have hoped that the fading of the pandemic’s clouds would leave a sunlit economy. But, as is their wont, events got in the way, ”he writes.

Feminist issues are moving up the agenda in France’s presidential election. Valérie Pécresse, the center-right candidate, began a recent interview with the country’s most popular TV host by going on the offensive over sexual assault allegations against him. “I want to say very clearly that if these accusations are true they’re serious and must be condemned,” she said to veteran presenter Jean-Jacques Bourdin.

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