Boris, Brexit and a whole lot of unwarranted hysteria
A no deal Brexit may not be as likely as our national misery guts like to think, says Merryn Somerset Webb. Everyone wants an easy out. And that's got to be good for the economy.
Read most of the commentary on the election of our new prime minister and you won't envy him at all. Boris Johnson has boxed himself in on Brexit. No deal will destroy the UK and slam everyone else in the process (to the extent that the International Monetary Fund has announced it as one of the biggest threats to global growth there is). The UK is on the edge of recession, and of course our population is "hopelessly divided".
There are elements of truth in all of this. But there is also an undercurrent of unwarranted hysteria. The UK economy isn't perfect. But many of its projected miseries are based on the expectation of either a disastrous "no deal" or a continuation of the present growth-destroying limbo. Both seem fairly unlikely. Johnson has banished the possibility of limbo: we leave, he says, on 31 October "no ifs no buts" which he clearly means (or he wouldn't have made Dominic Cummings a senior adviser).
As for no deal, it may not be as likely as our national misery guts like to think. When Theresa May first produced her deal, I suggested it would go through on the third or fourth reading. It didn't on the third. But what of the fourth? Everyone wants an easy out now, including most eurosceptics, and probably many Remain MPs, who now that no-deal really is on the table, will vote for almost anything to avoid it. It's also worth remembering that the real issue here is just the backstop. As the analysts at Gavekal note, this matters most to Ireland whom the EU must surely defer to on occasion. Given the effective choice between a border that gets complicated on 31 October or one that might "come with unspecified border controls sometime in the distant future", what will they choose? Quite.
So don't discount the possibility that May's deal will have more success under Johnson than under her. If it does, attention will turn to the UK economy, one from which the investment-delaying uncertainties of the last three years may well be about to vanish. Without them it doesn't look bad at all: unemployment is still the lowest since the mid-1970s; wages are rising at 3.4% well ahead of inflation, something that bodes well for consumption (household spending is 65% of GDP in the UK, so this matters); chuck in the fiscal boost from Johnson's spending plans and it isn't impossible to feel upbeat.
Johnson has put great emphasis on the importance of positivity the UK pulling itself out of its Remainer spiral of misery. He's right to do so. Optimism alone can't make good stuff happen, but it can help us be more rational about recognising the good stuff already happening. This week, we ask if UK stocks are in line for a Brexit bounce; John Stepek gives us his thoughts is the UK in an "anti-bubble?" David Stevenson takes a fresh look at one of my favourite long-term holdings, Syncona, and Dr Mike Tubbs runs through advances in stem-cell technology and the ways in which you can invest in them. Brexit aside, it will probably pay to be optimistic about the astonishing medical revolutions going on all around us.
For more on all this, please come to our panel show, The Butcher, the Brewer and the Commentator at the Edinburgh Fringe. Dominic Frisby and I will host for most of August (him to the 16th; me from the 17th on). Buy your tickets here.