Shall we talk Brexit? I can hear the groans across the land as you think to yourself, can I really handle another article about this subject? What is there to say, especially when ‘negotiations’ are still ongoing? Plus, there’s nothing that any of us can do about it, is there?
All of which are completely valid points, so I shall preface this piece by saying that I’m not intending to put forward any of my own views, but those of someone who in many ways takes a rather contrarian position, certainly to many in the media, and to many who suggest that Brexit will herald the end of times.
I met this individual, who happens to be an Oxford Don, and a chief economist and partner at a major asset manager only last month and I was so intrigued by his subjective view of Brexit that I immediately invited him to speak to our Strategic Partners event, which took place earlier this month. I did this knowing full well that a number within the room would find his views somewhat different from the mainstream but also because, whatever you might think about the pros and/or cons of Brexit, his was a thought-provoking viewpoint that deserved to be heard.
Firstly, let’s get to the crux of the matter, will there be a deal? This individual looks at this question logically and cites ‘Transpositions in Propositional Logic’ which apparently was first outlined by Chrysippus in 3BC, and states:
‘If A implies B, then NOT B implies NOT A.’
In terms of Brexit this would look like:
‘If a Bad Brexit implies Bad Things for the UK and the other EU27 member countries, then to avoid Bad Things for the EU27, you need a Good Brexit’.
He believes you have to look at the ongoing negotiations in terms of game theory, and it’s a two-stage game split between part one which was played out ahead of the 2016 referendum, and part two which has taken place since, and we might add, is still ongoing. He also believes part two, up until the time a deal will be done, has been nothing more than a pantomime and that it’s unlikely any deal will be achieved until right before the deadline.
However, in Part 1 of this game the EU wanted to maintain the status quo and tried to achieve this by saying Brexit would change things for the worse for Britain. As we know, the vote of the referendum rejected this, so having seen the UK elect to leave, the EU27 still wants to maintain the status quo, and the only way this can be achieved is through that Good Brexit. He cites the Beautiful Mind of John Forbes Nash Jnr – the Nash Equilibrium or sub-game perfect outcome is therefore a Good Brexit.
So, why does he believe a deal will be done before, or most likely, on March 29th? Well, it really is all about self-interest – Adam Smith in his Wealth of Nations, published in 1776, wrote:
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.”
The EU27 countries and some of the biggest European companies have a significant interest in a ‘Good Brexit’ for all manner of reasons – they have a significant share in UK earnings, they have market share, they run a trade surplus with the UK, a major share of their export business is with the UK, they have large numbers of nationals living here, the UK sends large numbers of visitors to their countries, there are many UK expats living there, the list goes on. But in effect, he narrows it down to this: ‘The UK’s economic success matters to the EU27.’
And that’s why he believes a deal will get done and it will be a ‘Good Brexit’. There, of course, is another big question around whether leaving the EU is a good thing or a bad thing for the UK? I don’t have time to go into the many arguments he has for the former, but let’s just say he believes the UK’s incredibly close ties with China will be the major economic driver for the country in the years to come, not its links with the EU. And don’t get him started on the media narrative that has been running for the last two and a half years or so.
As mentioned, not everyone will agree that a deal will be done, not everyone will agree that leaving the EU is good for the UK, but when it’s an argument based on facts and figures, it’s difficult not to at least be intrigued by what the future might bring, and how the UK economy might prosper outside the EU.
Bob Young is chief executive officer of Fleet Mortgages